Do short-term unconditional cash transfers change behaviour and preferences? evidence from Indonesia

ABSTRACT Short-term unconditional cash transfers are used as a temporary mitigation strategy during adverse economic shocks. They can however, cause adverse unintended impacts on behaviour and preferences. We estimate the effect of receiving short-term unconditional cash transfers on behaviour, risk aversion, and intertemporal choice in Indonesia. The country first introduced the program in 2005 and continues to use it whenever adverse economic shocks occur. With 15.5 million beneficiary households, the program remains one of the largest in the world. We use an individual-level longitudinal dataset spanning 1997 – 2014. To identify a causal relationship, we combine coarsened exact matching with difference-in-differences. We find no evidence that the short-term unconditional cash transfer affected beneficiaries’ behaviour or preferences. Together with evidence of its positive impact in mitigating the impact of adverse economic shocks, our findings show that short-term unconditional cash transfers should continue to be part of the government’s portfolio of social protection programs.