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​Dispelling the Myth of Welfare Dependency

October 2019Rema Hanna, Jeffrey Cheah Professor of South-East Asia Studies, Harvard Kennedy School


Social safety nets worldwide routinely come under attack by critics who say they incentivize idleness and create a culture of dependency. But my colleagues and I re-analyzed data from seven different experimental trials of government cash-transfer programs in developing countries and found no evidence that systematic income support reduces work. In another study, we showed that Indonesia’s cash-transfer scheme yielded significant improvements in some of the most stubborn and problematic areas of public health and education – gains that were made possible by a cumulative investment in children over the course of six years. Looking at these studies side-by-side suggests that it is time to rethink classical economic theory predicting that government payouts will lead individuals to work less. In fact, cash-transfer programs need not have adverse effects on work, and may allow poor families to make the substantial, long-run investments in their children that will allow them to escape poverty. 

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