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We know cash transfers improve lives. Can they transform entire economies?
By Caitlin Tulloch, Senior Director of Research, Learning, and Product at GiveDirectly
Summary:
What helps families living in poverty today? What makes economies grow in the long run? Development economics has often treated those two questions separately: one is ‘micro’ economics and the other is ‘macro’ economics. They’re frequently siloed into different textbooks and discrete journals.
For more than a decade, GiveDirectly has built some of the strongest evidence in global development on ‘micro’ issues: large, one-time cash transfers (often worth a year or more of people’s usual income) help households in poverty improve their lives. Yet most of the 1.5 billion people who have escaped extreme poverty since the 1990s did so because their ‘macro’ economies grew, creating jobs, raising wages, strengthening businesses, and opening new opportunities to work or move.
For decades, the community has debated if we should focus on ending extreme poverty with micro solutions or macro ones. I argue this is a false distinction. A macro economy is ultimately made up of the micro households and businesses inside of it. Reach enough of them at once, and those two questions start to converge.
That convergence is what GiveDirectly’s biggest-ever study is designed to test: can direct cash transfers at large enough scale help whole economies move out of poverty?
We already have hundreds of studies showing the “micro” effects of cash, meaning what happens inside individual households after they receive it. They earn more, spend more, and own more assets. We know what cash does, and also what its limitations are.
We also have promising evidence that cash can spark changes in local economies. In Kenya, cash transfers increased incomes for both recipients and their neighbors who didn’t receive cash: as recipients spent more, businesses earned more, and that spending circulated through the economy. Every $1 transferred generated about $2.50 in local economic activity, suggesting that household gains can spread more broadly and contribute to economic growth.
What we still know less about is what drives these economy-wide changes, and how many places in the world are ripe for that kind of market-wide impact to take hold. With GiveDirectly programs getting larger across enough different contexts, we can start asking better and more detailed questions about how economy-wide changes take place, and what it would take for those changes to stick.
What role can cash play in ending extreme poverty?
Operating at this scale requires a completely different set of questions. Open any of the five below to see what each one covers and how we’re testing it now.
- Can cash, at large enough scale, change how a whole economy works?
- What relationship should large-scale cash programs have with governments
- What is the most cost-effective way to design a large-scale cash program?
- Which families can escape poverty on cash alone, and which need extra support to get there?
- What does leaving poverty actually look like for a household, across shelter, food, savings, schooling, and resilience to shocks?
Explore all five questions in the interactive accordion on the original blog post.
GiveDirectly is already in the midst of delivering its largest cash program yet across two of Malawi’s poorest rural districts. By the end of 2026, roughly 120,000 households will be enrolled to receive a one-time, no-strings-attached cash payment. In the areas receiving cash, the total amount delivered will equal ~85% of local GDP.
The magnitude of this shock to the local economy is hard to overstate. In proportional terms, the amount of cash is like giving every adult in the United States a one-time payment of $114,000. You would feel it, your neighbors would feel it, and so would your niece who just graduated from college, and all of her friends.
That kind of scale is what makes this micro/macro learning agenda possible. We can test whether the effects we saw in Kenya hold as cash reaches much more of an economy in a different context, and use these insights to think about what might happen as we scale in future contexts.
This also creates rarer opportunities to test how individual behavior shapes the economy-wide effects. For example, we’re giving labeled grants to ~1,650 Malawian businesses so they can stock inventory and expand, and testing whether giving businesses advance notice of when cash will land helps them prepare for the surge in demand. This tells us more than whether those added supports “work.” It helps us see how businesses respond when more customers suddenly have money to spend, and whether access to extra capital changes that response.
We’re also testing whether other additions–such as financial coaching, smartphones, and more–make the effects of cash more likely to last, and more frequent surveys will help us see how and when those changes unfold as the cash moves through the economy.
For most of my career, I have been a dyed-in-the-wool applied microeconomist, squarely in the group that evaluates individual programs. But working on GiveDirectly’s learning agenda has convinced me that these questions were never really separate–they only look that way because we’ve rarely had programs big enough to study both at once. GiveDirectly’s growing scale is starting to change that.
Economies are made up of people, households, firms, and markets. If cash changes how enough people spend, save, work, invest, and take risks at the same time, those individual choices may add up to something much larger than any single household’s gains.
Our largest programs now give us the chance to watch that process unfold (or fail to) at far greater scale, in far greater detail, across contexts.
The stakes here go well beyond one program in one country. Progress against extreme poverty has stalled globally, and the sector is in urgent need of scalable solutions.
If cash delivered at sufficient scale creates lasting gains in jobs, businesses, markets, and incomes–under certain conditions–it gives governments and donors a tool they can deploy not just to improve lives at the margins, but to help spark growth from the bottom up.
If it does not, that is just as important to know. It would clarify where cash is powerful, where it is not enough, and what else communities need to leave poverty behind for good.
Either way, Malawi is just the beginning of a larger agenda. Each new program at scale, in a new context, brings us closer to answering the question this sector ultimately has to face: not just how to improve lives in poverty, but what it would take for whole places to leave poverty behind.
