Indirect Effects of an Aid Program: How Do Cash Transfers Affect Ineligibles' Consumption?

Abstract

Cash transfers to eligible households indirectly increase the consumption of ineligible households living in the same villages. This effect operates through insurance and credit markets: ineligible households benefit from the transfers by receiving more gifts and loans and by reducing their savings. Thus, the transfers benefit the local economy at large; looking only at the effect on the treated underestimates their impact. One should analyze the effects of this class of programs on the entire local economy, rather than on the treated only, and use a village-level randomization, rather than selecting treatment nd control subjects from the same community. (JEL H23, I38, O12, O15)

Conditional Cash Transfers for Women and Spousal Violence: Evidence of the Long-Term Relationship from the Oportunidades Program in Rural Mexico

“…This specification incorporates the possibility that local spillovers are a (linear) function of the proportion of beneficiary households in the village (e.g., 20 As shown by Angelucci and De Giorgi (2009) and Avitabile (2012), the program had spillover effects on the consumption levels and health behaviors (e.g.,, cervical cancer checks) of nonbeneficiary households. Bobonis and Finan (2009), Lalive and Cattaneo (2009) show evidence of spillover effects on middle-school participation among children in nonbeneficiary households.…”

Program Evaluation and Spillover Effects

“…Angelucci and De Giorgi (2009) Suppose one were to find that all village members benefit from the program because they redistribute the PROGRESA grant in the village regardless of the actual identity of the households that receive the transfer. This would mean that costly and time consuming household level targeting may not be required.…”

“…The local nontarget population may also be indirectly affected by the treatment through social and economic interaction with the treated. For example, the recipients of CCTs may share resources with, and affect the incentives to accumulate human capital of, ineligible households in treated localities (Angelucci and De Giorgi, 2009). …”

“…They naturally arise in active labor market programs (for example, Heckman, LaLonde, and Smith, 1999). With few exceptions (for example, Angelucci and De Giorgi, 2009;Mobarak and Rosenzweig, 2014), most studies of spillover effects in developing countries focus on the other mechanisms discussed above. Nevertheless, studying general equilibrium effects has both policy and economic relevance.…”

Remittances to Latin America from migrants in the United States: Assessing the impact of amnesty programs

“…The decrease in remittances may, in turn, halt the development prospects of these communities since remittances, despite being primarily private transfers within families, have also positive spillover effects on local economies. For example, as shown by the literature studying consumption smoothing in low-income economies, a cash injection into a group of households may affect other families living in the same village by increasing informal loans and transfers from family and friends (Rosenzweig 1988a and1988b;Udry 1994;Townsend 1995;Fafchamps and Lund 2003;Angelucci and De Giorgi 2009). Thus, it is important to gain a better understanding of the impact that immigration policies in immigrant-receiving countries may have on the stream of remittance flows to developing regions to help design interventions that mitigate the potentially negative effects (e.g.…”