Financial Security, Climate Shock and Social Cohesion

This paper examines the link between financial security and social cohesion, in a low-income setting where cohesion and prosociality play a crucial role in the integration of refugees into ultra-poor host communities. We first generate an exogenous shock to the financial security of both hosts and refugees, by implementing a field experiment of a large cash transfer and employment support program. Increasing the financial security of both refugees and hosts leads to higher levels of trust, new friendships with out-groups, a greater willingness to share resources with out-groups and a stronger sense of belonging for refugees. This increased our overall social integration index by 0.73 standard deviations relative to the control group. We then exploit a climate shock that negatively affected the financial security of some of the participants in our study. Consistent with a causal interpretation of the relationship between financial security and social cohesion, participants who experienced even a moderate reduction in financial security reported a disproportionately large weakening of prosociality of 0.53 standard deviations. Taken together, these findings suggest that individuals can shift between cooperative and competitive mindsets in response to changes in their economic circumstances. On the one hand, providing income and employment support to both refugees and low-income host community members led to more cooperative attitudes and behaviors, thus promoting gains in social cohesion and in socioeconomic integration. However, these gains were fragile and easily undone when individuals were exposed to a negative climate shock that made scarcity top of mind again.