How do cash transfers impact the people who don’t receive them? (2019)
It&#x27;s probably worth applying some scepticism to this study:<p>1. It&#x27;s an economics paper. Not a field with a reputation for accurate predictions beyond the basics.<p>2. It&#x27;s commissioned by a charity that wanted academic evidence of the benefits of its own policies, so it&#x27;s as conflicted as can be.<p>3. It&#x27;s research by academics who are as a group notoriously left wing, so they&#x27;re being asked to do research to support their own ideological preconceptions.<p>That doesn&#x27;t mean the conclusions are wrong, but it does mean they shouldn&#x27;t be accepted at face value, and you&#x27;d have to review it very thoroughly - ideally with external double checks of validity - to be able to conclude anything from it.<p>Doing even a very fast check of the paper immediately reveals a major problem: the headline claim of 0.1% price inflation excludes the price of labour, which inflated significantly. This pretty much explains the entire effect. Not surprisingly, if you start handing out cash at random in poor communities then the people who aren&#x27;t lucky enough to get it start demanding some of that cash too. But you don&#x27;t need research to know this. It&#x27;s economics 101, that&#x27;s what&#x27;s happening right now in western economies (big cash transfers from governments -&gt; inflation).<p>We may suspect the paper is being undermined by ideology and funder bias because its early statements on inflation try hard to hide this fact. At the start, it&#x27;s saying:<p><i>&quot;Importantly, we document ... minimal price inflation&quot;</i><p>(abstract). Then it becomes:<p><i>&quot;For inputs, we find positive point estimates [of inflation], but they are not always statistically significant. For outputs, we document statistically significant, but economically minimal, local price inflation.&quot;</i><p>(page 4). Unless read very cynically this sounds like good news. But then we notice how obfuscated this statement is. &quot;Positive [input] point increases but they are not always statistically significant&quot;, i.e. some are and the magnitude of the increase isn&#x27;t mentioned. Later we find:<p><i>&quot;we do see significant increases in the factors that we directly measure, and particularly in the wage bill: enterprises in treated (control) villages increase spending on labor by USD PPP 82 (70), a sizable change relative to the control mean&quot;</i><p>(page 20). So we&#x27;ve gone straight from &quot;minimal price inflation&quot; to &quot;significant increases ... a sizeable change&quot;. I&#x27;ve read so many academic papers in the last few years and whenever you see such large slippage between claims in the abstract and claims buried deep in the paper, it&#x27;s always a bad sign. It&#x27;s a leading indicator that there&#x27;s going to be other kinds of problem, probably involving bogus stats&#x2F;models&#x2F;assumptions.<p>Moving on. We might have hoped that people would use the money for investment that could permanently increase their standards of living after the cash transfers end, but that doesn&#x27;t happen:<p><i>&quot;Strikingly, we do not see strong evidence of a firm investment response&quot;</i><p>But this isn&#x27;t something that needs research to know, it&#x27;s the story of decades of massive and sustained foreign aid to Africa. Aid money gets spent on increased consumption but not sustainable investment.