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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.

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