Can unconditional cash transfers raise long-term living standards? Evidence from Zambia

In Africa, state-sponsored cash transfer programs now reach nearly 50 million people. Do these programs raise long-term living standards? We examine this question using experimental data from two unconditional cash transfer programs implemented by the Zambian Government. We find far-reaching effects of the programs both on food security and consumption as well as on a range of productive outcomes. After three years, household spending is on average 67 percent larger than the value of the transfer received, implying a sizeable multiplier effect, which works through increased non-farm activity and agricultural production. • Two unconditional cash transfers implemented by the Government of Zambia show strong protective and productive effects. • Both programs generate large income multipliers, averaging 1.67 across both programs. • Multipliers are generated through investment in non-farm activity in one case, and agricultural output in the other case. • Policy implication is that government sponsored unconditional cash transfers to the ultra-poor can lead to increases in long-term living standards and play an important part of an inclusive growth development strategy.