So how do you feel about not winning the lottery?

"Here's to exogenous shocks to our neighbour's wealth"

“Here’s to exogenous shocks to our neighbour’s wealth”

Happy New Year. So I’ve been thinking a lot about the charity GiveDirectly recently. They were my charity of choice a year ago and I am planning to make another donation soon. For those of you who are not in the know, GiveDirectly makes unconditional cash transfers to poor people in Kenya and Uganda. For every dollar I donate, roughly 91 cents of that ends up with a household, which is then free to do whatever they want with it.

The other day GiveDirectly sent me an e-mail which linked to a series of interviews with residents of a single village that had been on the receiving end of these unconditional transfers. What is particularly astonishing is that the charity not only asked recipients how they were faring (pretty good, thank you very much), but roughly half of the interviews are with households which were not deemed eligible.

What I might have expected was a degree of unhappiness or animosity over not being selected to receive a $1000 USD transfer. GiveDirectly uses its own methods of determining whether or not a household is classified as “poor” (in the village in question it was households without a metal roof on their primarily residence). Even though (I presume) the charity goes through great pains to make the selection criteria transparent, to people on the ground the whole endeavour might seem a bit, well, random. A bit like a manna from heaven.

Recently, three academics who have previously studied GiveDirectly released a paper suggesting that these transfers do have some sort of negative spillovers on households that didn’t receive the transfer. Johannes Haushofer, Jeremy Shapiro and James Reisinger found that non-recipients in villages which received GiveDirectly transfers reported substantially lower levels of life satisfaction. So if this negative spillover, which I will go ahead and call the Haushofer Effect (there – I just branded it – coming to a book store near you), really exists, then I would expect a substantial amount of lamentation in the GiveDirectly interviews of non-recipients.

To the contrary, most non-recipients said that, overall, they were happy that their village had received the transfers. I found this hard to believe, but after going through 50 interviews of non-recipients, most replied positively to the question “Are you, overall, happy that GiveDirectly came to your village?,” a handful replied neutrally, and only one was vocally unhappy about it. There was another question aimed more at the negative effects of not being selected, and even then only about 25% responded with identifiably-negative comments.

So what is going on here? Why is the Haushofer Effect not appearing in these qualitative interviews? As much as I would like to believe that people do feel happy about seeing their neighbours get a shitload of money, I think I am more likely to believe one of the following:

(1) People don’t want to appear selfish, especially in front of a charity which might might might might give them a ton of cash some day. One respondent actually spelled it out: “”I am happy with your coming with the hope that one day I will also benefit.”

(2) The more complicated answer is that there is something about the conditionality of the question that changes its meaning. These families might be honestly happy about the fact that their neighbours (who are poorer) got transfers. But all the negative externalities associated with that (envy, local prices, etc) still make them unhappy in aggregate. A great example of this appeared in a recent episode of This American Life, where Neil Drummond tried to reconcile the fact that he really was happy his old friend Ta-Nehisi Coates had found fame and fortune with the reality that their friendship was slowly dissolving as a result of it.

(3) This village is different than the average village in the study above in some unobservable way.

 

I have no sense as to which answer is the most likely. And none of it will stop me from donating to GiveDirectly again. That said, while the charity should be praised for putting these interviews up on their website, they could take a step further and link to the paper on negative spillovers.

 

Update: GiveDirectly’s Max Chapnick has a helpful reply/explanation in the comments below, rightly pointing out that the academic paper I cited relies on within-village randomization (rather than GD’s method of targeting poor households), so the Haushofer effect might be primarily driven by the unfairness inherent in that lottery mechanism. This is a pretty plausible reason for the differences between the empirical study and the informal interviews.