Economics & Finance / Economic Theory / Development Economics

Cash Gifts in Kenya: How Poor Families Spend on Food (Shocking Elasticity)

Most studies say poor families barely increase food spending when they get more money. But a massive randomized experiment in rural Kenya flips that idea. Researchers gave unconditional cash transfers to hundreds of households and tracked every single meal. The result? Food spending elasticity is 0.87—way higher than the 0.61 average from 48 African studies. Calories? 0.67. That means cash works. But here's the twist: traditional observational methods overestimate this effect by 10-12 percentage points. And no, there's no 'calorie poverty trap'—the math doesn't add up. This video breaks down the real numbers, the policy implications, and why your grandma's advice about cash might be wrong.