Workfare, wellbeing and consumption: Evidence from a field experiment with Kenya’s urban poor

Abstract

Restrictions like work requirements and constraints on voucher transfers are often used in social welfare systems, but little empirical evidence exists on their impact on wellbeing. We conducted a 10-day randomized experiment with 432 individuals living below the poverty line in the Kawangware settlement of Nairobi, Kenya, testing two elements of social welfare design: workfare versus welfare and restricted versus unrestricted vouchers. Participants were randomly assigned to a “Work” condition, involving daily work for unrestricted vouchers, or one of two “Wait” conditions, involving daily waiting for vouchers that were either unrestricted or partially restricted to staple foods. We find that working improved psychological wellbeing relative to waiting, suggesting that the means of implementing welfare programs may have important effects on individuals beyond the impact of monetary benefit alone. Furthermore, although the restrictions were inframarginal, partially restricted vouchers crowded-in spending on staple foods, suggesting the existence of a “flypaper effect” in spending from restricted vouchers.