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.

Susanna B. Berkouwer, Pierre E. Biscaye, Eric Hsu, Oliver W. Kim, Kenneth Lee, Edward Miguel, Catherine Wolfram