Ending Extreme Poverty through Social Protection? Experimental Evidence from 10-year Nationwide Randomised Cash Transfers in Rwanda and Malawi
Lead Research Organisation:
University of Oxford
Department Name: Economics
Abstract
650 million people, or 8.5% of the world's population, still live below the international poverty line of $2.15 per day. Despite concerted efforts from the international community, the UN's first Sustainable Development Goal (SDG) of ending extreme poverty by 2030 therefore remains highly ambitious. Which interventions and policies can make this a reality at the scale and speed required?
A robust body of research has shown that unconditional cash transfers (UCTs) - cash delivered to people living in poverty, no strings attached - are effective tools for improving people's livelihoods (Bastagli et al. 2016). GiveWell (a trusted evaluator of philanthropic initiatives) ranks cash transfers among the most cost-effective development interventions, higher than any other non-health intervention. Based on these findings, the non-governmental organisation GiveDirectly (GD) - in collaboration with the governments of Rwanda and Malawi - is embarking on an ambitious programme aiming to 'accelerate the eradication of extreme poverty' in both countries. It will provide $550 to every person living below USD 2.15 per day - a total of over 10 million recipients. The programme amounts to USD 6 billion (a quarter of GDP) over 10 years.
Although many small-scale randomized controlled trials (RCTs) have demonstrated that poor households use cash transfers effectively to improve their livelihoods at the micro level, it is not clear what the aggregate implications of such programmes are. Beyond directly benefitting recipients, a nationwide programme may affect non-recipients through changes in market and social interactions as well as political processes. Will increased spending by recipients on locally produced goods and services generate higher incomes for non-recipients? Will an influx of cash lead to deteriorating social relationships or inequality? Are there political repercussions? Does the periodicity, mode of delivery, speed of roll-out, or targeting within the household matter? How does supply in different sectors and geographies adjust? Will there be inflation? Can cash alone provide a big push to accelerate the structural transformation historically associated with the development process (Rosenstein-Rodan (1943))?
The programme is uniquely ambitious in scale and presents an unprecedented opportunity to generate rigorous evidence on how cash transfers affect entire national economies. Too often, big ideas are not evaluated carefully and independently, leaving us little better off in terms of knowing what works (see e.g. the Millennium Villages). Methodologically, studying phenomena at this scale is challenging: The 2019 Nobel Prize in Economics awarded to Banerjee, Duflo, and Kremer credits randomized controlled trials (RCTs) as providing 'reliable answers about the best ways to fight global poverty'. Yet, critics have argued that RCTs are often too small-scale and context-specific to study 'big' questions (Bardhan (2005); Easterly (2006); Deaton (2010)). However, such concerns may be unfounded. Rigour and relevance need not necessarily be compromised when randomization at-scale is feasible. But, no RCT has been able to evaluate interventions at this scale.
To do this, a new approach bridging micro- and macroeconomics that combines randomisation across large geographical units with careful spatial modelling is required. The Oxford Centre for the Macro-Experimental Study of Cash Transfers will design and implement - in collaboration with GD and the Malawian and Rwandan governments - a two-country nationwide RCT to independently evaluate impacts of the programme - the largest cash transfer RCT to date. In the process, it will develop the methodological tools for a novel macro-experimental approach to economics, allowing researchers to rigorously study national development interventions, bringing cutting edge research to implementation at scale, and impacting the lives of millions.
A robust body of research has shown that unconditional cash transfers (UCTs) - cash delivered to people living in poverty, no strings attached - are effective tools for improving people's livelihoods (Bastagli et al. 2016). GiveWell (a trusted evaluator of philanthropic initiatives) ranks cash transfers among the most cost-effective development interventions, higher than any other non-health intervention. Based on these findings, the non-governmental organisation GiveDirectly (GD) - in collaboration with the governments of Rwanda and Malawi - is embarking on an ambitious programme aiming to 'accelerate the eradication of extreme poverty' in both countries. It will provide $550 to every person living below USD 2.15 per day - a total of over 10 million recipients. The programme amounts to USD 6 billion (a quarter of GDP) over 10 years.
Although many small-scale randomized controlled trials (RCTs) have demonstrated that poor households use cash transfers effectively to improve their livelihoods at the micro level, it is not clear what the aggregate implications of such programmes are. Beyond directly benefitting recipients, a nationwide programme may affect non-recipients through changes in market and social interactions as well as political processes. Will increased spending by recipients on locally produced goods and services generate higher incomes for non-recipients? Will an influx of cash lead to deteriorating social relationships or inequality? Are there political repercussions? Does the periodicity, mode of delivery, speed of roll-out, or targeting within the household matter? How does supply in different sectors and geographies adjust? Will there be inflation? Can cash alone provide a big push to accelerate the structural transformation historically associated with the development process (Rosenstein-Rodan (1943))?
The programme is uniquely ambitious in scale and presents an unprecedented opportunity to generate rigorous evidence on how cash transfers affect entire national economies. Too often, big ideas are not evaluated carefully and independently, leaving us little better off in terms of knowing what works (see e.g. the Millennium Villages). Methodologically, studying phenomena at this scale is challenging: The 2019 Nobel Prize in Economics awarded to Banerjee, Duflo, and Kremer credits randomized controlled trials (RCTs) as providing 'reliable answers about the best ways to fight global poverty'. Yet, critics have argued that RCTs are often too small-scale and context-specific to study 'big' questions (Bardhan (2005); Easterly (2006); Deaton (2010)). However, such concerns may be unfounded. Rigour and relevance need not necessarily be compromised when randomization at-scale is feasible. But, no RCT has been able to evaluate interventions at this scale.
To do this, a new approach bridging micro- and macroeconomics that combines randomisation across large geographical units with careful spatial modelling is required. The Oxford Centre for the Macro-Experimental Study of Cash Transfers will design and implement - in collaboration with GD and the Malawian and Rwandan governments - a two-country nationwide RCT to independently evaluate impacts of the programme - the largest cash transfer RCT to date. In the process, it will develop the methodological tools for a novel macro-experimental approach to economics, allowing researchers to rigorously study national development interventions, bringing cutting edge research to implementation at scale, and impacting the lives of millions.
