Do Cash Transfers Change Household Consumption Preferences? – Evidence from an Unconditional Cash Transfer in Kenya

Abstract

The Kenya Cash Transfer Programme for Orphans and Vulnerable Children (CT-OVC) is the government’s flagship social protection programme, reaching over 125,000 households and 250,000 OVC across the country as of mid-2011. The programme’s objective is to provide regular cash transfers to families living with OVC, to encourage fostering and retention of children and to promote development of their human capital.

The CT-OVC Evaluation Team (2012) investigates whether the programme has changed the preferences of households in terms of their consumption behaviour. It is possible that transfer income may be used differently from earned income, particularly if families behave as if the transfer income is earmarked for children, as the message of the CT-OVC emphasises. While standard economic theory would suggest that source of income is irrelevant, and there has been some evidence from developed countries that shows this to be the case, other evidence has shown the opposite—i.e. that income acquired through government assistance programmes is allocated differently from other sources of income, especially when labelled as child benefits (Kooreman, 2000). If households do indeed treat transfer income differently and spend a disproportionate share on inputs to child health, then programme effects can be larger than expected from a pure unconditional transfer that is treated as regular income and thus only has an income effect on behaviour.

Citation

Kenya CT-OVC Evaluation Team. Do Cash Transfers Change Household Consumption Preferences? – Evidence from an Unconditional Cash Transfer in Kenya. International Policy Centre for Inclusive Growth (IPC - IG), Brasilia, Brazil (2012) 1 p pp.

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