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Should I Give a Cow or Cash for Christmas?

A few weeks ago the Heifer Project animal gift catalog made its annual pilgrimage through our mail slot, landing on our entryway floor right on time for the holidays. Donating a farm animal to a family in a developing country as a Christmas gift to another has become a tradition in our own family. Over the years, I have been the patron donor of chickens, a goat, rabbits, frankly, enough farm animals to make Old McDonald jealous. One year I gave (part) of a water buffalo to my younger brother.

This is an increasingly common Christmas present—to make a donation to a poor family in a developing country in the name of a loved one. Increasingly, organizations such as the Heifer Project, World Vision, Samaritan's Purse, Kiva, and other charitable organizations send out gift catalogs and online promotions with a bounty of attractive Christmas gifts to choose from: a pig for a family in Nepal, a microfinance gift certificate for a budding entrepreneur in El Salvador, a freshwater well in Ethiopia.

With so many options available, the obvious question is: Which gifts have the biggest positive impact for the poor? This is a question that interests me not just as a Christian but as a development economist. Do these donations really make a difference, and if so what kind of difference?

Do Heifers Help?

Let's start by looking at farm animal donations. The specific question here is whether this cute farm animal donation idea is just an ingenious way to make rich Americans feel less guilty about their holiday excesses, or whether it really helps poor people overseas. Cornell agricultural economics professor Chris Barrett and I worked with three of our eager graduate students to find out. We used a statistical matching method that paired recipient households with similar households who were next in the pipeline to receive an animal.

Is this cute farm animal donation idea just an ingenious way to make rich Americans feel less guilty about their holiday excesses, or does it really helps poor people overseas?

Our study, forthcoming in the journal Food Policy, found significant impacts on nutritional outcomes from Heifer's animal donations. We found that households receiving meat goats for breeding almost doubled monthly meat consumption. Households who received a dairy cow nearly tripled their monthly consumption of dairy products. (It is worth mentioning that the donated dairy cows were a foreign breed with super-charged udders that produce about 10 times the milk as domestic breeds.) The students carried out a survey in Rwanda with the Heifer Project, sampling over 400 families who applied to receive a pregnant heifer dairy cow or a meat goat. About half of these families had received one of the two animals. The remaining families were not approved to receive an animal at that time, or they were in the pipeline to receive one.

Moreover, we even found some evidence that the added dairy consumption reduced stunting (low height for age) in the small children of beneficiary households. Adding a measure of confidence to our results, Chris discovered a new study at a conference last summer that showed similar stunting-reversal impacts on children from dairy cow ownership in Ethiopia, especially when families were prevented from selling much of the milk because of logistics or lack of refrigeration. In short, it appears that when families can't market all the milk, they drink the rest of it up (or turn it into yoghurt).

But What About Cash?

The question remains whether giving a family a dairy cow is better than giving them something else, like cash perhaps. The pregnant heifers were not a cheap intervention, costing $3,000 to raise and deliver to beneficiaries. Frankly, it equates to a lot of cash.

In the charitable giving world, one can hardly bring up the subject of cash these days without talking about Give Directly. Give Directly is an exciting new non-profit started by my economics colleague Paul Niehaus, who teaches at UC San Diego, and his graduate school friends from Harvard. When donors contribute money online to Give Directly, it is quickly zapped into the e-money accounts of (very fortunate) rural Kenyans. Recipients typically receive $1,000 in two or more e-injections of cash.

Researchers at MIT recently carried out a randomized controlled trial to test the impacts of Give Directly. Released in October, the MIT study found that just over a year after receiving their first cash transfer,

household assets were 58 percent higher (mainly in herd animals), enterprise revenues were 48 percent higher from new livestock and expanded small businesses, family food consumption had increased so much that there was a 42 percent reduction in the number of days children went without food.

Moreover, the researchers found no increases in the consumption of what even economists call "sin goods": alcohol, cigarettes, or gambling.

These kinds of impacts are much greater than has been reported from a series of recent randomized trials of microfinance, another potential source of Christmas giving. Organizations such as Kiva, for example, offer microfinance gift certificates online. A Kiva gift certificate has the potential to be "a gift that keeps on giving" as the capital is recycled to borrower after borrower. But a half-dozen recent randomized controlled trials of microfinance undertaken around the world indicate that is typically has only moderate impacts, mainly on business expansion; the impact on household income and children's welfare pales in comparison to the impact of the cash grants. Indeed, in a recent study on microfinance in Nepal, my co-authors and I found that about three-fourths of the apparent before-and-after impact of microfinance is an optical illusion. The illusion is created when borrowers take loans at the time other positive factors are impacting their microenterprises.

Cash or Cows?

Given the relative impacts of cash injections, whether it is better to give cows or cash remains a hotly contested question. Indeed after the results of the MIT study on Give Directly were released, a reporter from NPR's This American Life challenged Heifer with a "horse race." In the experiment, Heifer would give an equivalent amount of cash to some (randomly selected) households instead of a cow. Heifer politely declined at the time, but the results of such an experiment could be very important for beneficiaries of charitable giving. At this point it seems that the burden of proof has now fallen to gifts-in-kind organizations to prove that what they do is more effective than simply giving poor people short-run injections of cash that they can spend in the way they deem most appropriate to their situation.

Given the relative impacts of cash injections, whether it is better to give cows or cash remains a hotly contested question.

Because of this, it is tempting to want to steer the Christmas gift in the direction of a Give Directly donation. But Heifer's evaluation director Rienzzie Kern sees the issue differently. In a public response to NPR, he acknowledges that while cash may help individual families in the short term, Heifer's mission, he says, is not so much about cows as about building sustained social capital within villages, as offspring of the animals are passed from family to family. Farm animal donation is a means to community-building, he maintains, something that is hard for cash to do.

Water for Christmas?

Communities are something that Living Water has been serving for over 20 years, not through animal donation, but through boreholes that create wells bringing clean water to villages through the love of Christ in 23 countries around the world. Single-focused on this mission, Living Water is now at 12,797 boreholes and counting. As unsexy as it sounds, it is hard to think of a better Christmas present than a borehole.

In a survey of top development economists reported last year (CT February 2012), and before Give Directly was on people's radar, I asked this group of experts to rate the most common development interventions on a scale of 0 to 10, based on their relative effectiveness per dollar. In the survey, providing clean water to villages ranked a clear number 1 with an 8.3 rating. For an average of about $60, you can give a charitable Christmas gift in a loved one's name that provides fresh water for a family of six for an entire year. Since water is typically a community-level good, it represents a very different kind of gift than cash or even cows, and one that has been shown to have enormous benefits on increased health and reducing infant mortality (studies have shown infant mortality falls as much as 20 to 50 percent with clean water).

This Christmas we can eschew the materialistic spirit of our culture, and instead make Christmas a time of giving to those truly in need, whether cash or cows. As Christians we need to be good stewards with our resources—and with our giving. Let us give with generous hearts, but prayerfully and wisely.

Bruce Wydick is Professor of Economics at the University of San Francisco. His novel about coffee growers in Guatemala, The Taste of Many Mountains, is forthcoming from Thomas Nelson (HarperCollins Christian) in July 2014.

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Should I Give a Cow or Cash for Christmas?