Money or Power? Financial Infrastructure and Optimal Policy
In response to the Covid-19 crisis, 186 countries implemented direct cash transfers to households, and 181 introduced in-kind programs that lowered the cost of utilities such as electricity, water, transport, and mobile money. Do cash or in-kind transfers generate greater welfare improvements? And, does a country’s financial infrastructure affect optimal aid disbursement?
Through a parallel set of surveys in two urban regions in Africa—with comparable education, cell phone ownership, and electricity connectivity—we show that optimal government aid disbursement hinges on financial infrastructure.