Giving the poor a wodge of cash is better than dripping it out
Abhijit Banerjee, co-founder and co-director of the Abdul Latif Jameel Poverty Action Lab (J-PAL) and Nobel Laureate in economics, was among the researchers presenting the results from the first two years of GiveDirectly's twelve-year universal basic income (UBI) scheme in Kenya, which suggests that lump-sum cash transfers are more effective at supporting small businesses than monthly payments.
Speaking on the effectiveness of UBI programmes as a pathway to poverty alleviation, Abhijit says, “Two big worries with any of these interventions is that they’ll make people lazy and they’ll make them consume badly, and you see neither.”
What happens when you give people free money? The world’s largest basic-income experiment is trying to find out. Since 2018 the American charity GiveDirectly has been sending the equivalent of $22.50 a month to thousands of villagers in western Kenya. On December 1st researchers including Abhijit Banerjee, a Nobel prize-winning economist, presented results from the first two years of the trial.
The core idea of a universal basic income, which is intended to reduce poverty, is to send money to everyone, without strings attached, regardless of their earnings or if they are employed. But attempts to test it, from Finland to California, have generally made payments to a smattering of individuals for short periods of time. The experiment in Kenya is unusually “universal”: it covers every adult within selected villages and will run for 12 years.