Description:

Speaker: Alvis Tang

Title: Demand-Induced Reallocation? Evidence from Household Cash Transfers (Joint with Kyra Carmichael)

Abstract: Mounting evidence suggests that unconditional cash transfers are effective policy instruments in the developing world. This has caused some to call for scaling them up, with ambitions to cover entire countries. We study the reallocation induced by large-scale cash transfers in two RCT settings: Kenya (Egger et al, 2022) and an ongoing trial in Malawi. Implementing a modified Hsieh and Klenow (2009) approach in Kenya, we find that non-agricultural enterprises in both control and treatment villages grow in TFPR. Furthermore, the variance of TFPR of non-agricultural firms in treated villages is lower than that in control villages. We outline a stylized model highlighting the role of liquidity frictions in allocative consequences and discuss future research directions.