IPA’s weekly links

Guest post by Jeff Mosenkis of Innovations for Poverty Action.

kenyan-shilling

Somehow yesterday turned into Guaranteed Basic Income Day.

  • In the morning, Freakonomics released a podcast about the idea – a simple social safety net of a minimum income everybody would be guaranteed. Liberals and libertarians alike have gotten behind the idea in the past, and now some in high-income countries see it as a solution in increasingly high-tech economies where some make a lot of money while others have a very difficult time in the labor market. The main concern others have is whether it would discourage people from working.
    • The Canadian Government did a 5-year experiment with an entire town in the 1970’s. The 30% who qualified were given about $15,000 in today’s dollars a year. Amazingly, the data was never analyzed – the papers are still sitting in 1,800 boxes in the national archives (there’s a major opportunity for a funder!)
    • However, one economist was able to use health insurance records to look at the town in a quasi-experiment, and found it improved health, and education for boys (who apparently weren’t under as much pressure to drop out of high school to work). It didn’t discourage work (the main fear) for the primary earner, but did seem to allow second earners to work less (such as mothers who’d just had babies).
  • Later in the day, GiveDirectly (which just gives cash to poor people) co-founders Michael Faye and Paul Niehaus announced on Slate that the organization would be embarking on a 10-year, $30 million experiment giving a basic income to 6,000 Kenyans, and are fundraising for it.
  • Vox’s Dylan Matthews also had an article on the announcement and previous research.
  • This morning Berk Özler suggested that just comparing people who get the money to those who don’t is a wasted opportunity. Why not compare cash alone to another successful program such as the Ultrapoor Graduation Model, which offers a six-pronged approach for the poorest?
  • Some more resources on this for those interested: IPA’s currently working with GiveDirecly on a general equilibrium study, to test the broader economic effects of these kinds of cash grants on area economies and individual well-being.  We’re also doing what Berk suggested, comparing the Ultrapoor Graduation model to cash grants, in Ghana. And of course, the original evaluation is available (paper & plain language summary).
  • If you’re new to the cash transfers discussion, a couple of notes: basic income policies of course would look different in wealthy and low-income countries (tests have been announced in several wealthy countries). And nobody thinks cash to individuals can solve broader systemic problems in poor countries, such as infrastructure or governance. The question being debated really is what’s the most effective way to spend limited aid dollars. As Chris put it:

    I’ve seen many, many, many projects that spend $1500 training and all the “other stuff” in order to give people $300 or a cow. Is it fair to ask, what if we’d just given them $1800? Or what if we’d given six people cows?

  • Deaton, (as I understand him) would be skeptical of this cash influx, assuming officials will find ways to exploit it, or that it undermines the motivation of the government to provide services when people are receiving assistance from outside sources. The 10-year scope of the new study should be a good opportunity to test his hypothesis as well.