Panel Paper: Are Cash Transfers the Silver Bullet? Evidence from an Unconditional Cash Transfer in Zambia

Saturday, November 8, 2014 : 9:10 AM
San Juan (Convention Center)

*Names in bold indicate Presenter

David Seidenfeld, American Institutes for Research
The impact evaluation of Zambia’s Child Grant Program (CGP) is one of the first rigorous studies of an unconditional cash transfer program in Africa.  The CGP is one of the Government of Zambia’s largest social protection programs, providing a monthly cash payment of 60 kwacha (U.S. $12) to very poor households with children under five years old. A randomized control trial of 2,515 households was implemented to investigate the impact of the program.

After 24 months of receiving the program, we find that cash transfers affect a wide range of social and economic outcomes.  On the social side, the program reduces poverty, improves household consumption, food consumption, diet diversity, and food security. These outcomes lie along the causal pathway linking the cash transfer to children’s nutrition. For children under five, we observe weakly positive impacts on weight. We find strong and significant heterogeneous impacts on reduced stunting among children who have access to clean water or more educated mothers.  We also find large reductions in diarrhea for children under five years old. For older children we find large impacts on material well-being, with a 33 percentage point increase to the number of children who have all three needs met (shoes, second set of clothing, and a blanket).  We also find large impacts on crop and livestock production. The CGP increases the amount of land operated, the use of agricultural inputs, and spending on seeds, fertilizer, and hired labor. The CGP increases the overall value of the harvest by ZMW 146, which is a 50 percent increase from baseline. The program also increases the production of livestock. The CGP has a positive impact on the ownership of a wide variety of animals, both in terms of share of households with livestock and in the total number. Further, beneficiary households experience approximately double the volume of purchase and sales of livestock compared with control households.

We find impacts to non-farm business activity and shifts in the labor supply from working on other people’s farms to focusing on own farm and non-farm enterprises. Moreover, the program also increases the number of months in operation, the value of total monthly revenue and profit, and the share of households owning business assets. The program does not have any impact on child work for pay.

What is particularly exciting about the results presented here is that the CGP not only addresses the immediate consumption and food security needs of recipients but also leads to significant increases in the productive capacity of households. A probably reason for these impacts is the fact that the cash is unconditional, thus allowing households to use the money to address their needs as they see fit, while conditional cash transfers leverage money on one or two specific outcomes, thus narrowing the range of potential impacts among households that are constrained across a number of domains of well-being.