It's all in the timing: Cash transfers and consumption smoothing in a developing country

Samuel Bazzi, Sudarno Sumarto () and Asep Suryahadi

Journal of Economic Behavior & Organization, 2015, vol. 119, issue C, 267-288

Abstract: We use a large-scale unconditional cash transfer program in Indonesia to investigate the importance of timing in shaping household consumption responses to fiscal interventions. Timely receipt of transfers yields no expenditure change relative to non-recipients. However, delayed receipt reduces expenditures by 7.5 percentage points. Ignoring heterogeneous timing leads to sizable underestimates of expenditure impacts. After considering several data-driven explanations, we reconcile these findings with models of consumption smoothing in which liquidity constraints imply asymmetric responses to positive and negative shocks. Our results parallel findings on government transfers in rich countries and yield new implications for program evaluation.

Keywords: Cash transfers; Marginal propensity to consume; Liquidity constraints; Program evaluation (search for similar items in EconPapers)
JEL-codes: D12 D91 I38 O12 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (20)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:119:y:2015:i:c:p:267-288

DOI: 10.1016/j.jebo.2015.08.010

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