Finally, direct cash transfers have been particularly effective in moments of unexpected crises (e.g., during the Covid-19 pandemic or when facing climate disasters, see Pople et al 2021). They’ve also been especially impactful in helping young people make their financial futures more secure (see Owusu-Addo et al 2018).
Several studies show that the circulation of recipients’ money benefits local farmers and traders, who (re)invest this additional income in productive assets. Investments by these indirect beneficiaries increase and diversify their levels of production, thereby significantly improving the cost and quality of the goods they supply their communities with (see Creti 2010, Holmes and Bhuvanendra 2013, Handa et al 2018).
Direct cash transfers serve as a foundation for responsible decision-making and increased well-being. Many studies show that the autonomy recipients are given over the money they receive helps build self-confidence and a sense of control over their lives (see Molyneux et al 2016, McGuire et al 2020).
This can be both empowering and motivating, giving someone the means to strive for something they had always dreamed of but never thought possible (see Garcia et al 2016).
Furthermore, better education and greater financial security allow recipients to more easily refuse exploitative labor practices. Finally, doing work that they enjoy increases recipients’ motivation and success (see Sutrisno and Sunarsi 2019).
Studies carried out by the World Bank have shown that direct cash transfers foster people's resilience to the adverse effects of external shocks by lowering income risks and facilitating savings. Direct cash transfers also contribute to helping children stay in class in times of crisis, which often lead to a drop in attendance (see Finan et al 2004, Premand and Stoeffler 2020).
During the recent Covid-19 pandemic, researchers also found that direct cash transfers both reduced poverty as well as enabled unemployed recipients to look for work. Those who received payments could be more active and engaged in society, which ultimately aids labor market recovery (see Köhler and Bhorat 2021).
In addition, a recent study suggests that direct cash transfers may even reduce deforestation because recipients do not have any need to insure themselves by earning money through forest clearing work (Ferraro and Simorangkir 2020).
Evidence suggests that especially from a long-term perspective, direct cash transfers help women make freer decisions in contexts where social or familial structures would otherwise limit their financial independence (see Plagerson and Ulriksen 2015, Iqbal et al 2021).
Research on the Bolsa Familia program in Brazil, for example, found that an expansion of cash transfers to young people caused a 6.5% reduction in crime in neighborhoods with schools, increasing attendance and allowing young people to worry less about paying for essential goods. In the long run, this also contributed to helping recipients live their lives more freely and with less fear (see Chioda et al 2016, see also Machado et al 2018, Breckin 2019).
Direct cash transfers enable entrepreneurs and artists to dedicate themselves to their craft without having to worry about food or basic necessities. In fact, the very first recipients of Social Income were a small cohort of artists in Freetown, Sierra Leone. The group reported that Social Income helped them above all to be more creative in their art practice (see Thomas 2016, Teer 2020).
One study has shown that a direct cash transfer program led to significantly better health for participants in the short term (18 months) and even more so in the long term (7 to 10 years) (see Banerjee et al 2021). Another study (Baird et al 2016) further showed that cash transfer programs reduced HIV prevalence and the rate of teen pregnancy (see also Nery et al 2017, Okeke and Abubakar 2020).
Many studies have found that direct cash transfers have two important effects on recipients’ food security. First, it increases access to better quality food. Second, it indirectly helps improve people's knowledge about a healthy diet, cooking methods, and the safe handling of food. These two aspects combined improve recipients’ diets and nutrition in a significant way (see Gitter and Caldes 2010, Miller et al 2011, Burchi et al 2018, Hidrobo et al 2018, Haushofer et al 2020).