Our policy question is: when is it optimal for an organization such as Give Directly to transfer money to recipients as soon as possible, and when is it better to delay giving some of the money until the recipients experience an adverse event causing a loss of income.
We've found this paper, but it only has aggregated mean/variance quantities across households and only one type of shock. Any pointers would be appreciated!
(Some quick thoughts hastily written based off some class papers I wrote a while back.)
One dataset that pops to mind is the India Human Development Survey. This is a rich household-level dataset that includes total household monthly income (disaggregated by source) and if I recall right, also tells you what month it is. These are time-intensive to work with, but I imagine a few others datasets like this exist in the world. And you can estimate "income" per month with them.
My guess is you'll get obvious insights from this, like income dropping during cold / dry seasons in more agricultural-dependent villages.
That said, my gut feeling with the policy question is that sending cash transfers sooner is better. A few reasons:
Hope this helps. Happy to chat about this more.
Thank you for the comment, I learned a lot from it. Would appreciate to hear what you think about my responses.
I think the first point about consumption smoothing is critical. My reading of the literature is almost the opposite - that although the poor find ingenious ways to save, their ability to smooth consumption is very limited. I wonder why that is. Maybe it's because Portfolios of the Poor focuses on Bangladesh, India and South Africa which are much more developer financially than some other countries. But we will need to think about this some ... (read more)
Thank you for the comment, I learned a lot from it. Would appreciate to hear what you think about my responses.
I think the first point about consumption smoothing is critical. My reading of the literature is almost the opposite - that although the poor find ingenious ways to save, their ability to smooth consumption is very limited. I wonder why that is. Maybe it's because Portfolios of the Poor focuses on Bangladesh, India and South Africa which are much more developer financially than some other countries. But we will need to think about this some more.
The point about debt is very important and well taken. We will need to consider not just income but wealth more generally. I've corrected the question.
Regarding idiosyncratic shocks, our thought was that family level income/consumption/wealth data allows us to measure the frequency of idiosyncratic shocks. In addition, an Organization like GiveDirectly must in any case have direct communication with potential recipients to be able to transfer the money, which implies family illness may be observed.
Regarding systematic shocks, out thought was that it is easier for the donor to convert cash to goods than for the affected people. So if what they need in a drought is grain and not cash, the donor could accommodate this quite easily.