Panel Paper: In Search of the Holy Grail: Can Unconditional Cash Transfers Graduate Households out of Poverty?

Saturday, November 9, 2019
Plaza Building: Concourse Level, Plaza Ballroom F (Sheraton Denver Downtown)

*Names in bold indicate Presenter

Sudhanshu Handa, University of North Carolina, Chapel Hill, Gelson Tembo, University of Zambia, Luisa Natali, UNICEF and Gustavo Angeles, University of North Carolina

“An object or goal that is sought after for its great significance.” –Meriam-Webster Dictionary

In 2010 the Government of Zambia’s Ministry of Community Development and Social Services (MCDSA) began implementing an unconditional cash transfer (the Child Grant Programme-CGP) targeted towards families with a child under age three years in the districts of Shangombo, Kalabo and Kaputa. Eligible households received the equivalent of U.S. $12 per month paid in cash bimonthly irrespective of household size, an amount deemed sufficient to purchase one meal a day for everyone in the household for one month. Householsd were extremely poor with median consumption prior to program start-up 30 US cents per person per day. An evaluation of the CGP conducted between 2010-2014 showed widespread impacts of the programme across both protective and productive domains, and calculated that the programme had generated a significant multiplier effect on recipient households in the range of 1.5 three years after the transfers started. In other words, each kwacha transferred was converted into an additional 0.5 kwacha, primarily through non-farm enterprise and increased agricultural production (Handa et al JDE 2018).

In 2015 the Government of Zambia reformed its cash grants programs and merged all existing programs into one ‘harmonized’ unconditional program with eligibility based on categories (e.g. high dependency ratios, existence of disabled family members, etc). Only 25 percent of the original recipients of the CGP also qualified for the new programme. We returned to all study households (N=2519 households) in 2017 and conducted an additional round of data collection, which when added to the prior surveys in 2010, 2012, 2013 and 2014 yields a seven-year panel data set of households who all had a child under the age of three in 2010—these focal children were aged 3-10 in 2017.

The study exploits the ‘natural experiment’ of the reform to address several questions about the long-term effects of an income transfer. First, we see whether the large multiplier effects of the CGP are sustained after households were removed from the programme. This entails comparing households originally in the CGP but no longer eligible for the harmonized programme with the experimental control group who never received benefits under either programme. Second, we compare households in the sample who did qualify for the new harmonized programme, to see if there is immediate ‘catch-up’ in consumption and other outcomes among the original control group who now qualified for the harmonized programme, or whether the original CGP beneficiaries continue to have an advantage in terms of consumption and children outcomes.

Our main finding is that large and across the board impacts of the CGP that occurred at 36-months have disappeared after households left the program. In other words, the original results, even though they encompassed economic investment and productive activity, were not sustained. This is driven mostly by fade-out but also some catch-up, and the pattern depends on the type of outcome we examine.