BSP_Vol7Issue1_Interior_final.indd 70 6/15/21 10:06 PM field review Behavioral insights into cash transfers to families with children Lisa A. Gennetian, Eldar Shafir, J. Lawrence Aber, & Jacobus de Hoop abstract 1 Cash transfer programs aim to lessen the harmful effects of economic deprivation by giving cash or its equivalent directly to people in need. In this article, we combine insights from three areas of behavioral science— economics, child development, and cognitive psychology (including behavioral economics and the psychology of poverty)—to shed light on the logic behind providing cash transfers to families with children and to identify specific design features that policymakers should consider when creating these programs. We also summarize key research findings on the outcomes of such programs and present case studies of projects that have been evaluated in randomized controlled studies. We argue that unconditional cash transfers (which provide the money with no strings attached) are preferable to conditional cash transfers (which require recipients to meet specified conditions) for providing economic security and improving children’s life outcomes. Conditional cash transfers can achieve similar goals, however, if they impose little administrative burden on parents and if infrastructure is in place to support meeting the conditions for receiving the cash. We end with recommendations for how best to design cash transfer programs for families with children. Gennetian, L. A., Shafir, E., Aber, J. L., & de Hoop, J. (2021). Behavioral insights into cash transfers to families with children. Behavioral Science & Policy, 7(1), 71–92. a publication of the behavioral science & policy association 71 BSP_Vol7Issue1_Interior_final.indd 71 6/15/21 10:06 PM undreds of millions of children around In light of the dire risks that poverty poses to the world live in poverty.1 Indeed, even children, we examine in this article the ratio- Hbefore the COVID-19 pandemic, more nale for providing cash transfers specifically to than 20% of children below the age of 5 years families with children, and we make recommen- lived in poverty in the United States, and an equal dations for enhancing the effectiveness of such proportion lived in extreme poverty worldwide, programs. Knowing that children thrive when according to official poverty measures.2 they have stable, nurturing environments; set routines; responsive parenting; and good health w It is now all too clear that economic deprivation care, nutrition, and education, we have as our and financial instability can pose severe risks ultimate goal understanding how cash transfer Core Findings to children beyond immediate consequences programs can best support parents’ efforts to like hunger and homelessness. More than 250 give their children a fair shot at future economic What is the issue? million children under 5 years of age in devel- security and the opportunity to reach their full Children in families facing oping countries are estimated to be at risk of potential. We also argue that parents should be economic precarity are missing standard cognitive or health devel- supported in ways that respect their dignity and exposed to a number of risks that affect their opmental milestones because of conditions agency, preserving their right to make decisions long-term cognitive and stemming from poverty.3,4 The National Acad- for themselves and their family. health development. To emies of Sciences, Engineering, and Medicine combat this, policymakers have increasingly turned have reported that in the United States, We apply an interdisciplinary lens to the under- to cash transfers in times standing of how cash transfers affect recipients, of crisis. But the type of on average, a child growing up in a family incorporating insights not only from classical cash transfer matters for whose income is below the poverty line economic and child development theories but efficacy. Upon review, we find that unconditional experiences worse outcomes than a child also from cognitive psychology, particularly cash transfers should be from a wealthier family in virtually every behavioral economics. Behavioral economics preferred where possible. dimension, from physical and mental explores unconscious cognitive processes that health, to educational attainment and influence people’s decisions and behavior and How can you act? Selected recommendations labor market success, to risky behaviors recognizes how the context of poverty drains include: and delinquency.5 mental resources. Our analysis illuminates the 1) Directing cash transfers features that policymakers should consider to families with children for an amount that is (See note A.) Reducing the prevalence and child when designing and implementing a cash at least 20%–25% of a development consequences of poverty should transfer program—such as whether the program region’s poverty threshold therefore be a global policy aim.6 should provide money without strings attached 2) Using debit cards as a or set certain behaviors as conditions—and money-provision vehicle for a seamless, easy-to- Even in politically stable countries, families it indicates that specific behavioral science– access delivery system can end up in financially precarious states for informed design features can be incorporated any number of reasons, such as unsteady, into cash transfer policies to harness human Who should take low-paying jobs; permanent decreases in the agency in support of families’ and children’s the lead? demand for low-skill workers in an industry; lack economic well-being. We also draw insights Researchers, policymakers, and philanthropists of access to low-interest credit; unexpected from selected studies of cash transfer programs focused on child natural disasters and economic crises; and from around the world that target families with development, economics, the failure of governmental or private support children and from several programs that have education, health, or labor programs to provide sufficient food, shelter, and been formally evaluated through a randomized other necessities. To alleviate the consequences controlled design. of economic precarity, governments often turn to cash transfers—the direct delivery of money We conclude that cash transfers targeted to or its equivalent (such as debit cards) to be families with children are an effective strategy expended as recipients deem necessary. Cash for enriching children’s environments and transfers are increasingly being used by coun- their development but could be improved by tries around the globe, although only a minority implementing the design strategies that we of the world’s population has access to them.7,8 outline. We also conclude that combining cash transfer policies with targeted investments in 72 behavioral science & policy | volume 7 issue 1 2021 BSP_Vol7Issue1_Interior_final.indd 72 6/15/21 10:06 PM early childhood development could generate recommended a bundle of policies, including outsized improvements in children’s environ- a refundable child tax credit in which larger ments and development. refunds go to families with children younger than 5 years of age as well as a monthly allow- ance for each child under 17 years of age in a Basics family.5 As this article is being written, lawmakers Cash transfers are one approach among many and the Biden administration are considering that can be applied to combat poverty in fami- several child allowance proposals for families lies with children. Other types of programs in the United States. Organizations like UNICEF provide specific services, such as health care, advocate for and sometimes assist in imple- housing, early literacy training, or mental health menting cash transfers that provide immediate counseling, rather than money. Such strategies economic resources to displaced families. can achieve narrowly defined outcomes but usually work only in specific locales and often As briefly mentioned earlier, cash transfers are not scalable.9 Moreover, interventions that often take one of two basic forms. Uncondi- require certain behaviors, such as attending tional transfers enable recipients to receive the literacy classes, are likely to fail if families lack money with no strings attached. These transfers the stability and economic resources needed can be one-time outlays or provided at regular to reap the program’s full benefits.10 Further, intervals for a period of time. The programs rest although strategies to supplement services or on the assumption that adults want the best for build infrastructure are well intended, they often their children, know what is good for their fami- fail to reach income-poor people in a timely lies, and can be trusted to spend their income manner, at the moments when they are needed accordingly. The programs can also be rela- most. tively cost efficient in that they do not incur the administrative expenses of setting up and main- Giving money directly to recipients avoids these taining the infrastructure for providing specific drawbacks. Cash transfer programs, which are services or goods. often government sponsored, usually have the dual aim of alleviating the detrimental effects Unconditional programs, however, can run of economic deprivation on families with chil- into political opposition, primarily by people dren while at the same time supporting the who fear that the cash will encourage people productivity of the children’s caregivers (that to not work (and will thus fuel dependency is, their ability to work).11,12