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General Equilibrium Effects of Cash Transfers: Experimental Evidence from Kenya

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  • Dennis Egger
  • Johannes Haushofer
  • Edward Miguel
  • Paul Niehaus
  • Michael W. Walker

Abstract

How large economic stimuli generate individual and aggregate responses is a central question in economics, but has not been studied experimentally. We provided one-time cash transfers of about USD 1000 to over 10,500 poor households across 653 randomized villages in rural Kenya. The implied fiscal shock was over 15 percent of local GDP. We find large impacts on consumption and assets for recipients. Importantly, we document large positive spillovers on non-recipient households and firms, and minimal price inflation. We estimate a local transfer multiplier of 2.4. We interpret welfare implications through the lens of a simple household optimization framework.

Suggested Citation

  • Dennis Egger & Johannes Haushofer & Edward Miguel & Paul Niehaus & Michael W. Walker, 2019. "General Equilibrium Effects of Cash Transfers: Experimental Evidence from Kenya," NBER Working Papers 26600, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:26600
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    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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