General Equilibrium Effects of Cash Transfers: Experimental Evidence From Kenya

How large economic stimuli generate individual and aggregate responses is a central question in economics, but has not been studied experimentally. We provided one-time cash transfers of about USD 1000 to over 10,500 poor households across 653 randomized villages in rural Kenya. The implied fiscal shock was over 15 percent of local GDP. We find large impacts on consumption and assets for recipients. Importantly, we document large positive spillovers on non-recipient households and firms, and minimal price inflation. We estimate a local transfer multiplier of 2.5. We interpret welfare implications through the lens of a simple household optimization framework.

Automated summary

This study examines the effects of large economic stimuli on individuals and the overall economy, and provides meaningful insights through an experiment conducted in rural Kenya. The results show that cash transfers have significant impacts on consumption and assets for recipients, and also generate positive spillover effects on non-recipient households and firms, with minimal inflation.