Do Formal Transfers Crowd Out Informal Transfers to the Poor? Evidence from Bangladesh

Interviene: Selim Gulesci, Università Bocconi

Organizzato da: Dipartimento di Economia

Abstract: I provide evidence on whether unconditional formal transfers lead to a crowding out of informal transfers, and if so which households in the community are most likely to be affected by this. I exploit the randomized roll-out of a large scale asset transfer program (the ultra-poor program) in Bangladesh to test whether informal transfers received by the targeted households are crowded out by the program. I find that treated households experience a crowding out in the informal transfers that they receive. In particular the transfers they receive from within the community are crowded out, and this effect is heterogenous by the degree of vulnerability of the household at baseline - those who had greater food insecurity at baseline are less likely to experience a crowding out in their informal transfers. I provide evidence that this heterogeneity in the crowding-out effect is likely to be caused by an innovative component of the program studied, which entails the establishment of village elite committees to make the local elites target their transfers to the targeted poor that are in greater need.