[....[ we now estimate that GiveDirectly’s flagship cash program is 3 to 4 times more cost-effective than we’d previously estimated.
It is important to note two things: (1) this won’t alter our Top Charities list or our grantmaking—we believe that the programs we currently direct funding to are at least twice as cost-effective as this new estimate, so we don’t expect to support GiveDirectly’s flagship program in the near term; and (2) this update is the result of re-evaluating the evidence underpinning GiveDirectly’s program, which we hadn’t formally done since 2019—the structure of GiveDirectly’s program has not changed (though they are now carrying it out in more locations since our last evaluation).
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Our best guess is that there are positive consumption spillovers from the GiveDirectly program—as nearby non-recipients benefit from the uptick in local economic activity—and that these positive consumption spillovers are about 60% to 70% as large as the direct consumption benefits to recipients.
This update is partly informed by Egger et al. 2022, a new paper that was published since we last evaluated the GiveDirectly program. The study on which the paper is based distributed cash to 10,500 households in Western Kenya between 2014 and 2017. Egger et al. found that every $1 injected into these communities generated $2.50 in economic activity, and that around 70% of this economic activity stemmed from positive consumption spillovers to non-recipients. It also found minimal (0.1%) price inflation.
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The study was conducted in an unusually dense and well-connected setting, and we’d expect offsetting effects like inflation to be more likely in more remote contexts. There’s suggestive evidence of this from two evaluations of non-GiveDirectly cash transfer programs in Mexico and the Philippines, which found more concentrated inflation in more remote markets.
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Egger et al. are continuing their research, and we anticipate a follow-up in the next few years about the persistence of the transfer effects in years five to nine; they are also studying the effect of transfers in Malawi, where they will explore whether the non-inflationary effects generalize to another setting. GiveWell will be keeping a close eye on these developments, and (as always) will update our estimates in light of new information.
From the blog post:
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