Psychology, Skills, or Cash ? Evidence on Complementary Investments for Anti-Poverty Programs

Growing evidence on the links between poverty and psychology has prompted increased interest inthe psychosocial impacts of economic interventions and the economic impacts of psychologically motivated interventions.In practice, psychologically motivated programs typically comprise one of many components in multifaceted povertyalleviation programs. This paper asks, what are the benefits of allocating complementary, marginal investments inanti-poverty programs towards skills development or psychologically-targeted interventions versus directeconomic assistance The paper benchmarks two program-based investments against an unconditional cash transfer byrandomly assigning participants in an existing anti-poverty program to one of three groups. The first ispsychologically-targeted. It focuses on promoting self-confidence, sense of value and self-worth, andperceived social status. The second targets specific skills: goal setting, public speaking, and networking. Bothprogram-based investments cost around USD \$35 per participant, motivating a benchmark, cost-equivalentunconditional cash transfer. The findings show that the psychologically-targeted intervention significantly improvespsychosocial outcomes but shows no economic gains relative to cash, while the skills-based program improves economicoutcomes with few effects on psychosocial outcomes. The results illustrate that low-cost psychologically-targetedand skills-based interventions can be effective marginal investments relative to a small cash transfer, but theirbenefits may accrue in different domains.