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Cash transfers in an epidemic context : the interaction of formal and informal support in rural Malawi

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  • Strobbe, Francesco
  • Miller, Candace
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    Abstract

    This paper investigates the short-run consumption expenditure dynamics and the interaction of public and private arrangements of ultra-poor and labor-constrained households in Malawi using an original dataset from the Mchinjii social cash transfer pilot project (one of the first experiments of social protection policies based on unconditional cash transfers in Sub-Saharan Africa). The authors exploit the unique source of exogenous variation provided by the randomized component of the program in order to isolate the effect of cash transfers on consumption expenditures as well as the net crowding out effect of cash transfers on private arrangements. They find a statistically significant reduction effect on the level of consumption expenditures for those households receiving cash transfers, thus leading to the rejection of the perfect risk sharing hypothesis. Moreover, by looking at the effects of cash transfers on private arrangements in a context characterized by imperfect enforceability of contracts and by a social fabric heavily compromised by high HIV/AIDS rates, the analysis confirms the presence of crowding out effects on private arrangements when looking at gifts and (to a lesser extent) remittances, while informal loans seem to be completely independent from the cash transfer's reception. From a policy perspective, the paper offers a contribution to the evaluation of the very recent wave of social protection policies based on (unconditional) cash transfers in Sub-Saharan Africa, suggesting that there might be an important role for public interventions aimed at helping households to pool risk more effectively.

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    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 5824.

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    Date of creation: 01 Oct 2011
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    Handle: RePEc:wbk:wbrwps:5824

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    Keywords: Safety Nets and Transfers; Rural Poverty Reduction; Labor Policies; Services&Transfers to Poor; Debt Markets;

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    1. Dubois, P. & Jullien, B. & Magnac, T., 2006. "Formal and informal risk sharing in LDCs : theory and empirical evidence," Economics Working Paper Archive (Toulouse), French Institute for Agronomy Research (INRA), Economics Laboratory in Toulouse (ESR Toulouse) 200608, French Institute for Agronomy Research (INRA), Economics Laboratory in Toulouse (ESR Toulouse).
    2. Cox, Donald & Eser, Zekeriya & Jimenez, Emmanuel, 1998. "Motives for private transfers over the life cycle: An analytical framework and evidence for Peru," Journal of Development Economics, Elsevier, Elsevier, vol. 55(1), pages 57-80, February.
    3. Thomas, Jonathan & Worrall, Tim, 1988. "Self-enforcing Wage Contracts," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 55(4), pages 541-54, October.
    4. Stefan Dercon & Pramila Krishnan, 2000. "In Sickness and in Health: Risk Sharing within Households in Rural Ethiopia," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 108(4), pages 688-727, August.
    5. Albarran, Pedro & Attanasio, Orazio P., 2002. "Do Public Transfers Crowd Out Private Transfers? Evidence from a Randomized Experiment in Mexico," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
    6. Stefan Dercon & Pramila Krishnan, 2003. "Risk Sharing and Public Transfers," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 113(486), pages C86-C94, March.
    7. Pedro Albarran & Orazio P. Attanasio, 2003. "Limited Commitment and Crowding out of Private Transfers: Evidence from a Randomised Experiment," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 113(486), pages C77-C85, March.
    8. Grimard, Franque, 1997. "Household consumption smoothing through ethnic ties: evidence from Cote d'Ivoire," Journal of Development Economics, Elsevier, Elsevier, vol. 53(2), pages 391-422, August.
    9. Udry, Christopher, 1994. "Risk and Insurance in a Rural Credit Market: An Empirical Investigation in Northern Nigeria," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 61(3), pages 495-526, July.
    10. Suneetha Kadiyala & Stuart Gillespie, 2006. "Community-level Impacts of AIDS-Related Mortality: Panel Survey Evidence from Zambia ," Review of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 28(3), pages 440-457.
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