Consumption, household transfer effects

The economic analysis also simulates the impact of the program s transfer element on consumption poverty and predicts that poverty falls by about 2.5 percent using a poverty line of either US 1 or US 2 per day. This is an upper bound of the short-run effect. If households save and invest any of the transfer, or if they reduce the number of hours they work, the immediate poverty impact will be lower. If the investments yield a return, the long-run effects on poverty reduction may be higher (World Bank 2006a). 

Cash transfers have been used effectively to address many of the needs of poor people. The intended beneficiaries include those who are poor and have a low level of consumption for a variety of reasons. Some households might simply have too few people working at wages that are too low, and therefore require additional support that can be provided by family allowances, common in Eastern Europe, and food stamps as in the United States. Other intended beneficiaries include households that do not have anyone who, due to age or disability, can be expected to work. These households can usually be reached with pensions as in Bangladesh and South Africa, family allowances, and food stamps. Cash programs can also provide temporary cash transfers to those who have suffered losses of assets, income, and/or consumption as a result of an uninsured shock for example, as has occurred in Indonesia, Mozambique, and Pakistan after natural disasters. See also box 7.3 on the effectiveness and flexibility of cash transfers in emergencies. 

Sharma, M. 2006. An Assessment of the Effects of the Cash Transfer Pilot Project on Household Consumption Patterns in Tsunami-Affected Areas of Sri Lanka. Washington, DC International Food Policy Research Institute. 

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