Great Expectations: Responses to Current and Future Transfers for Low-Income Individuals (WP-26-17)
Achyuta Adhvaryu, Jean-François Gauthier, Pamela Jakiela, and Dean Karlan
How does the expectation of aid change behavior? The authors propose a simple approach to separate expectations effects from the direct effects of relaxing resource constraints: compare the promise of a program to the program itself. The authors test this approach in a four-arm randomized controlled trial of cash transfers in Uganda. Both those who received cash and those promised-to-receive cash increase their labor supply and investment. Immediate transfers also increase household expenditures and savings. The authors’ results are not consistent with standard life-cycle models; they are better explained by a model in which the transfer increases individual labor productivity.