Experimental Study of Income Inequality

Haushofer and colleagues report on a randomised trial of cash transfers to poor people in Kenyan villages.[1] They find that when some people receive a material cash transfer this adversely affects those who do not, on the cognitive, but not affective components of psychological wellbeing. However, the effect is short-lived, dissipating over the 15-month follow-up period in the study. The authors are careful to point out that there is no reason to avoid making the transfers, which, among other things, empower women and reduce violence. In any case, how can society function if people are not allowed to escape from poverty for fear of upsetting their neighbours? All the same, conspicuous consumption is distasteful because it does adversely affect those around you, and should thus be avoided.

— Richard Lilford, CLAHRC WM Director

Reference:

  1. Haushofer J, Reisinger J, Shapiro J. Your Gain Is My Pain: Negative Psychological Externalities of Cash Transfers. 2015.
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One thought on “Experimental Study of Income Inequality”

  1. Hum? Have you read the paper? A fantastically complex design and analysis for an RCT.

    I wonder why it was only registered on 4th December 2014, despite having been completed nearly two years earlier on 28 Feb 2013.

    I’ll need stronger evidence to shift my prior belief that, all else being equal, income inequality doesn’t affect psychological well being.

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