Cash Transfers and Social Capital: Evidence from a Randomized Controlled Trial in Malawi

Summary

We examine the social capital implications of conditional and unconditional cash transfer (CCT) programs in Malawi, randomly assigning adolescent women and their households to either program or to a control group. Our results show that cash transfers have a positive aggregate effect on social capital, proxied by trust and gift giving. They also show positive intention-to-treat effects on both trust and gift giving in the short run but a negative spillover effect on gift giving in the long run. Moreover, we find that CCTs have greater positive effects on trust than the unconditional cash transfers (UCT). Further analyses reveal that adolescents with initial reciprocal beliefs drive the increase in trust. These results contribute to the current debate on whether CCTs or UCTs are better policy tools, adding the important ‘externality’ of social capital formation.