This paper investigates the short-run consumption
expenditure dynamics and the interaction of public and
private arrangements of ultra-poor and labor-constrained
households in Malawi using an original dataset from
the Mchinjii social cash transfer pilot project (one of
the first experiments of social protection policies based
on unconditional cash transfers in Sub-Saharan Africa).
The authors exploit the unique source of exogenous
variation provided by the randomized component of the
program in order to isolate the effect of cash transfers on
consumption expenditures as well as the net crowding
out effect of cash transfers on private arrangements. They
find a statistically significant reduction effect on the
level of consumption expenditures for those households
receiving cash transfers, thus leading to the rejection of the perfect risk sharing hypothesis. Moreover, by looking
at the effects of cash transfers on private arrangements
in a context characterized by imperfect enforceability of
contracts and by a social fabric heavily compromised by
high HIV/AIDS rates, the analysis confirms the presence
of crowding out effects on private arrangements when
looking at gifts and (to a lesser extent) remittances, while
informal loans seem to be completely independent from
the cash transfer’s reception. From a policy perspective,
the paper offers a contribution to the evaluation of the
very recent wave of social protection policies based on
(unconditional) cash transfers in Sub-Saharan Africa,
suggesting that there might be an important role for
public interventions aimed at helping households to pool
risk more effectively.