Private transfers and public policy in developing countries : a case study for Peru

Private interhousehold cash transfers are an important source of income in many developing countries. Although precise transfer patterns are only beginning to be researched, the authors review the preliminary evidence from other studies and conduct original analysis based on the recent Peru Living Standards Survey. The paper reveals that private transfers are being directed toward vulnerable groups in society. The poor, the elderly, the very young, the disabled, the unemployed, and female headed households all receive disproportionately more transfers than their share in the population. In Peru, the lowest income quintile's share in total income is increased by 14 percent as a result of private transfers. In contrast, public transfers ( mostly social security payments ) increase that quintile's income share by only 4 percent. The authors conclude by revealing that these findings are not consistent with a purely altruistic model of giving, which predicts a one to one substitution for public giving. They are consistent with theories of exchange and private insurance.