I’ve been supporting basic income to some of the world’s poorest people through GiveDirectly for a couple of years now, and I highly recommend it. Your money simultaneously helps some of the people who most need it, and supports research into the effects of basic income, research we very much need as we debate future economic policies.

For about a decade now, the charity GiveDirectly has been distributing cash straight to poor residents in sub-Saharan Africa, starting in Kenya and expanding later to Uganda, Malawi, Rwanda, Liberia, the Democratic Republic of the Congo, and Morocco.

The organization was founded by economists, and has been studying the impact of its programs from the get-go. But the research has focused narrowly on recipients: Were they better off, the same, or worse off than people not getting cash?

Now, a research team has released a study of a large-scale GiveDirectly program that distributed over $10 million in cash to rural residents of Siaya County, Kenya, near Lake Victoria. But this time, the focus was not on the individuals who received aid. Instead, the researchers wanted to find out what effect the cash had on the region of Kenya where the aid was being distributed — the first major study to test “general equilibrium” effects of the policy.

GiveDirectly gave about $1,000 (or $1,871 in purchasing power terms) each to more than 10,500 households, through three transfers over the course of about eight months. The program amounted to about 15 percent of the GDP of the local area. For comparison, that’s about three times as much economic stimulus, relative to the size of the economy, as the 2008-09 stimulus packages in the US.

So the researchers conducted extensive, repeated surveys not just of recipients but of local businesses and employers too, to see how wages and prices change. Given how many people were collecting data, the study as a whole cost upward of $1 million to pull together, according to Ted Miguel, a coauthor on the paper and economist at UC Berkeley. (Miguel wrote the paper with Dennis Egger, Johannes Haushofer, Paul Niehaus, and Michael Walker.)

They found that the cash transfers not only benefited recipients; they benefited people in nearby villages too because recipients spent more money, some of which went to their neighbors’ businesses. Contrary to some fears, there were no meaningful inflation effects, and there were no envy or jealousy effects where people close by who didn’t receive cash felt worse off after the intervention.

Most striking of all, the study estimates a “fiscal multiplier” of 2.6 for this area of Kenya, implying that every $1 invested in fiscal stimulus will grow the local economy by $2.60. That’s somewhat larger than the multiplier estimated in places like the US when in recession. But “there’s probably many low- and middle-income countries that look more like Kenya than the US,” Miguel says. “These numbers could be very useful in understanding fiscal multipliers in many places across the world.”

Source: A charity dropped a massive stimulus package on rural Kenya — and transformed the economy