The observed effect sizes of cash transfers on cognitive performance (short-term 2-5 wk, long-term 12-13 mos) were roughly three and four times smaller than suggested by prior non-randomized research

Does alleviating poverty increase cognitive performance? Short- and long-term evidence from a randomized controlled trial

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Cortex, Oct 2023. https://www.sciencedirect.com/science/article/abs/pii/S0010945223002241

Abstract

In this Registered Report, we investigated the impact of a cash transfer based poverty alleviation program on cognitive performance. We analyzed data from a randomized controlled trial conducted on low-income, high-risk individuals in Liberia where a random half of the participants (n = 251) received a $200 lump-sum unconditional cash transfer – equivalent approximately to 300% of their monthly income – while the other half (n = 222) did not. We tested both the short-term (2–5 weeks) and the long-term (12–13 months) impact of the treatment via several executive function measures. The observed effect sizes of cash transfers on cognitive performance (b = .13 for the short- and b = .08 for the long-term) were roughly three and four times smaller than suggested by prior non-randomized research. Bayesian analyses revealed that the overall evidence supporting the existence of these effects is inconclusive. A multiverse analysis showed that neither alternative analytical specifications nor alternative processing of the dataset changed the results consistently. However cognitive performance varied between the executive function measures, suggesting that cash transfers may affect the subcomponents of executive function differently.

Significance Statement

Prior non-randomized studies observed that alleviating poverty can largely improve the cognitive functioning of the poor by unburdening their cognitive bandwidth. Based on that, they also argued that unconditional cash transfers can be effective at breaking poverty traps. We tested this account both in the short- and the long-term in a randomized controlled trial using a one-off cash transfer – equivalent approximately to 300% of the participants' monthly income. Although we observed a small effect of receiving cash transfers both one month and a year after the treatment, cash transfers, in our study, did not significantly increase the cognitive performance of the poor. These findings suggest that the positive effects of poverty-alleviation policies on cognition are smaller than previous non-randomized research suggested.