A multifaceted poverty reduction program has economic and behavioral consequences

Abstract

This paper examines the causal impact of poverty reduction interventions on the social preferences of the poor. A multifaceted poverty reduction program in China provides a setting for the use of a fuzzy regression discontinuity design. The design compares households with base-year income just below a preset criterion, who were more likely to receive the program treatment, with households just above the criterion. Five years after the program's launch, we conducted a lab-in-the-field experiment to measure the distributional preferences of household heads. Combining quasi-random variation from program rules with administrative census and experimental data, we find both economic and behavioral consequences of the program: It increased household income by 50% 5 y later, increased consistency with utility maximization by household heads, and increased their efficiency preference while reducing selfishness and leaving equality preference unchanged. Our findings advance scientific understanding of social preferences formation and highlight a broad perspective in evaluating poverty reduction interventions.