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Paying for Happiness: Experimental Results from a Large Cash Transfer Program in Malawi | JPAM Featured Article

April 23, 2018 02:02 PM

By Kelly Kilburn, Gustavo Angeles, Sudhanshu (Ashu) Handa, Peter Mvula, and Maxton Tsoka

Article Introduction

Cash transfer policies have become an immensely popular social protection strategy across low and middle-income countries over the last couple of decades with recent adoption particularly high in sub-Saharan Africa. This means that hundreds of millions of people are currently reached by some form of state-sponsored cash transfer program. By in large, cash transfers have improved the lives of the poor by increasing consumption, economic productivity, and child schooling. Recent attention, however, has focused on the effect of cash transfers on subjective assessments to understand the broader, more holistic impact of these programs on well-being. From a policy perspective, this emerging knowledge can complement evidence on objective well-being and be used to enhance the effectiveness of social protection policy for the poor.

This article examines the causal effect of national cash transfer program in Malawi on the subjective well-being of household caregivers. Results reveal that the income from the program can have a profound impact on caregiver subjective well-being. Caregivers report large improvements in life satisfaction and future outlooks. These findings are in line with the programs’ effects on objective measures of well-being, but the improvements in objective well-being do not explain the direct program effect on subjective outcomes. Incorporating subjective welfare indicators into social policy evaluations can thus complement existing objective measures and provide a deeper understanding of how policies affect quality of life across dimensions other than economic or material. With the growth of cash transfer programs across Africa, it will be important to continue to employ these metrics to understand if subjective well-being is an independent factor in the successful transition out of poverty cycle.

This article preview is from the Spring 2018 issue of the Journal of Policy Analysis and Management (JPAM). APPAM invites authors from each issue to asnwer a few questions about their research to further promote the quality work in the highly-ranked research journal. Check out this and other JPAM articles online.

Author Interview with Kelly Kilburn

What spurred your interest in this research about Malawi’s cash transfer program, or about transfer programs in general? 

I spent a summer in Kenya working with UNICEF’s Social Policy Division for Eastern and Southern Africa and researching cash transfer programs in the region when I was an undergrad. This experience formed the foundation of my interest to obtain a PhD in Public Policy with a focus on poverty and economic development. This paper was a product of my dissertation research in which I worked on the impact evaluation of Malawi’s Social Cash Transfer Program expansion. I am specifically interested in how these policies affect decision-making and social dynamics within the household so this paper was a natural extension of these interests.

Can you speak to the impact of cash transfers on preference analysis? Does this stable income for the duration of transfers increase rational decision making, thereby enabling recipients to improve their situations beyond the period of transfers?

A growing area of interest in development research is the psychology of poverty. The literature on decision-making in the context of poverty suggests that chronic financial stress and worry can result in (economically) irrational choices due to the level competing demands that can limit a person’s cognitive bandwidth. Our study contributes to this growing evidence by showing that small, but consistent cash transfers can increase happiness for caregivers in extreme poverty.

Caregivers in qualitative interviews emphasize how the money had a major effect on reducing their chronic worry that stems from their food insecurity and poor financial situations. Reduction of stress and improved financial situations may in turn reduce the mental accounting burden on caregivers and improve their rational decision-making capabilities. Growing evidence from The Transfer Project on cash transfer programs in Malawi and other countries indicates that programs are having important effects on forward looking behaviors such as investments in household production. Future research could add to our knowledge by explicating the relationship between cash transfers, happiness, and productive impacts. 

Considering that at lower income levels, where income has a greater tie to fulfilling basic needs and leads to a stronger relationship between happiness and income, how can your research inform policy to benefit low-income families in developed countries?

In higher-income countries, social protection programs more often provide in-kind transfers (such as food or housing vouchers) than cash. In the United States at least, giving direct cash is an unpopular idea partly because there is a perception is that low-income families would misuse the money (e.g. to buy items such as alcohol and tobacco).

In developing countries, however, this myth has been debunked and there is now robust evidence that cash transfers are used ‘responsibly’ and does not increase consumption of alcohol and tobacco. Cash transfers may have a larger impact on the happiness of low-income families in developed countries than other policies because it gives them more flexibility to take care of their most immediate needs, reducing financial stress.

As we know happiness is related to better health, educational, and economic outcomes, the benefits of direct cash may outweigh in-kind transfers in the long-run but more research should be done to answer these questions. Program evaluations of social protection policies should be encouraged to include subjective well-being metrics to add to this evidence base.

How big of a concern is/should be leapfrogging and the lowered subjective well-being of neighbors not receiving transfers when implementing and evaluating cash transfer programs?

‘Leapfrogging’ is the situation when program beneficiaries quickly move to a higher standard of living over other community members who were nearly as poor but did not receive the program. This could create resentment and lower social cohesion in the community and should be considered when designing programs. Leapfrogging was not a main concern in Malawi and the design of the Social Cash Transfer Program was important.

First, from the beginning, community input was involved through targeting procedures that used local knowledge to designate the bottom ten percent of households. Second, the cash transfers are provided at regular intervals (monthly or bi-monthly) and are relatively small, accounting for around 20% of household consumption before the program. Therefore, we are not talking about a huge leap for the beneficiary families (in Malawi, beneficiaries still considered themselves poorer than their friends and neighbors). Since this design is standard for most large-scale cash transfer programs in sub-Saharan Africa, concern is low, but measuring subjective well-being in the community would help us better understand spillover effects.

What challenges, if any, did you find when conduction this research? How can further study overcome these challenges?  

One challenge we faced was in the timing of the follow-up survey. Ideally, we would have collected the follow-up survey during the same time of year as the baseline survey, but because the program rolled out later than expected, we had to push back the follow-up survey to allow enough time for the program to generate effects. As our study population are subsistence farmers in rural Malawi, seasonal fluctuations in the consumption patterns influence their level of worry over food, which could reasonably affect their present state of subjective well-being. Our cluster-randomized study design was therefore important in allowing us to account for parallel trends in the control group and any differences across cluster locations. Further, the paper includes a number of alternative statistical models to control for different forms of bias and all provide robust estimates of our results.  

How does this study impact or add to the existing research? What would be the ideal next step for your research findings? How would you like to see your findings implemented? 

This study is one of the first to measure and report on subjective well-being outcomes associated with a large-scale, national cash transfer policy. It has demonstrated that the provision of small but consistent cash transfers can have large effects on caregiver’s well-being. We believe impact evaluations of government programs should continue to utilize subjective well-being measures as they are simple to implement within surveys and provide valuable information about the full impacts of programs for recipients. As cash transfer programs are now reaching millions across Africa and the global south, future research should focus on building knowledge on the association between growth in these metrics and the successful transition out of the poverty cycle.

About the Authors

Kelly_Kilburn Kelly Kilburn is a postdoctoral fellow at Institute for Global Health and Infectious Diseases at the University of North Carolina, Chapel Hill. She holds a PhD in Public Policy and has significant experience working on evaluations of national cash transfer programs for poor and vulnerable populations across sub-Saharan Africa. Dr. Kilburn’s work applies interdisciplinary quantitative techniques to analyze the health and economic impacts of development policies in low-income countries. She is currently studying the relationships between poverty and adolescent sexual behaviors in South Africa to produce policy-relevant evidence that can be used to prevent new HIV infections. By taking an interdisciplinary approach to her research, she aims to inform the design of comprehensive interventions to improve health and well-being across the life course.

Gustavo Angeles is a research assistant professor in the Department of Maternal and Child Health at the University of North Carolina at Chapel Hill. Dr. Angeles is a health economist with interest in the impact of development programs on household’s demographic, health, and economic outcomes. His work focuses on applied evaluations of ongoing programs in developing countries as well as on methodological and measurement problems for estimating program impacts correctly. He is currently examining the impact of cash transfer programs on poverty, human capital, and productive outcomes in Malawi, Ghana, Zimbabwe, and Zambia. Angeles is also Senior Evaluation Advisor for MEASURE Evaluation, a global USAID-funded project to improve the capacity for evaluating population, health and nutrition programs in developing countries. Angeles was Deputy Director of MEASURE Evaluation during 2000-2010 with focus on capacity building, knowledge management and evaluation.


Sudhanshu (Ashu) Handa is an economist specializing in poverty and human capital in developing countries. He is the Lawrence I. Gilbert Distinguished Professor of Public Policy at the University of North Carolina at Chapel Hill. He has twice gone on professional leave to work at UNICEF, first as Regional Social Policy Advisor for Eastern and Southern Africa in Nairobi (2006-2008) and most recently as Chief of Social & Economic Policy at UNICEF Office of Research-Innocenti in Florence, Italy. Dr. Handa is one of the Principal Investigators of a multi-country study on the impact of national cash transfer programs on households and children ( led by UNICEF and FAO. Dr. Handa previously worked at the Inter-American Development Bank (Washington DC), the International Food Policy Institute (Mexico, Mozambique), and the University of the West Indies Mona Campus (Jamaica).

Peter_Mvula Peter Mvula is a Senior Research Fellow in Rural Livelihoods at the Centre for Social Research. Dr. Mvula has decades of experience as a researcher using both quantitative and qualitative research methods in the fields of rural livelihoods, nutritional status of rural communities, food security, safety nets and social protection, health related issues, disability, poverty and disaster and relief operations. He has helped design and implement over a dozen large scale primary data collection studies, including evaluations of major Government of Malawi social programs such as the Fertilizer Input Subsidy Program (FISP), the Public Works Program, and the Early Childhood Development Initiative. He has also consulted with or engaged in collaborative research projects with the World Food Programme, the World Bank, DFID, UNICEF, the Malawi Social Action Fund, the World Bank, Oxford Policy Management and UNC-Chapel Hill. Peter obtained his PhD in Rural Development with particular bias on rural livelihoods from the University of East Anglia, UK.
  Maxton Tsoka is an associate research professor at the Centre for Social Research of Chancellor College, University of Malawi. He holds a PhD in Social Policy and Social Work from the University of York, in the United Kingdom. As a public policy analyst, he has been involved in the development of the policy framework for the Poverty Alleviation Programme, Malawi Vision 2020, and the Malawi Poverty Reduction Strategy Paper. His research focuses on public expenditure analysis, policy processes, and social protection programmes. Dr. Tsoka also worked as an economist for the Government of Malawi at the Department of Economic Planning and Development. He joined the Centre for Social Research of the University of Malawi as a research fellow for public policy in 1995.

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