Abstract
Abstract Poor households often rely on transfers from their social networks for consumption smoothing, yet there is limited evidence on how antipoverty programs affect informal transfers. This paper exploits the randomized rollout of BRAC’s ultra-poor graduation program in Bangladesh and panel data covering over 21,000 households over seven years to study the program’s effects on interhousehold transfers. The program crowds out informal transfers received by the targeted households, but this is driven mainly by outside-village transfers. Treated ultra-poor households become more likely to both give and receive transfers to/from wealthier households within their village; and less likely to receive transfers from their employers. As a result, the reciprocity of their within-village transfers increases. The findings imply that, within rural communities, there is positive assortative matching by socio-economic status. A reduction in poverty enables households to engage more in reciprocal transfer arrangements and lowers the interlinkage of their labor with informal insurance.
Highlights
In rural parts of developing countries, individuals are faced with substantial risks and often rely on transfers from their social networks for consumption-smoothing (Rosenzweig (1988), Udry (1994)); yet there is limited evidence on how large-scale antipoverty programs affect interhousehold transfers
Faced with highly volatile earnings and limited access to credit and insurance markets, the poorest households in rural economies often rely on transfers from their social networks
It is important to understand how large-scale antipoverty programs targeting poor households within a village affect their access to informal transfers and the structure of transfer networks within targeted communities.[37]
Summary
In rural parts of developing countries, individuals are faced with substantial risks and often rely on transfers from their social networks for consumption-smoothing (Rosenzweig (1988), Udry (1994)); yet there is limited evidence on how large-scale antipoverty programs affect interhousehold transfers. The ultra-poor in treatment villages were 13 percentage points (ppt) less likely to have received informal transfers (during the 12 months preceding the survey) relative to the control group, while the effect on the intensive margin is imprecisely estimated. Ultra-poor households in treatment communities were 4ppt less likely to report an employer as a source of transfers - a large effect considering that in the control group only 9% of ultra-poor households reported an employer as a source of transfers To understand whether this effect was driven by a general shift away from wage-labor I restrict the sample to ultra-poor households who were engaged in wage-employment at baseline as well as at the two followup surveys; and I find that they were less likely to receive transfers from their employers. This section describes the selection procedure of the beneficiaries and the details of the program
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