How large economic stimuli generate individual and aggregate responses is a central question in economics, but has not been studied experimentally. We provided one-time cash transfers of about USD 1000 to over 10,500 poor households across 653 randomized villages in rural Kenya. The implied fiscal shock was over 15 percent of local GDP. We find large impacts on consumption and assets for recipients. Importantly, we document large positive spillovers on non-recipient households and firms, and minimal price inflation. We estimate a local transfer multiplier of 2.5. We interpret welfare implications through the lens of a simple household optimization framework.

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Despite numerous journalistic accounts, systematic quantitative evidence on economic conditions during the ongoing COVID-19 pandemic remains scarce for most low- and middle-income countries, partly due to limitations of official economic statistics in environments with large informal sectors and subsistence agriculture. We assemble evidence from over 30,000 respondents in 16 original household surveys from nine countries in Africa (Burkina Faso, Ghana, Kenya, Rwanda, Sierra Leone), Asia (Bangladesh, Nepal, Philippines), and Latin America (Colombia). We document declines in employment and income in all settings beginning March 2020. The share of households experiencing an income drop ranges from 8 to 87% (median, 68%). Household coping strategies and government assistance were insufficient to sustain precrisis living standards, resulting in widespread food insecurity and dire economic conditions even 3 months into the crisis. We discuss promising policy responses and speculate about the risk of persistent adverse effects, especially among children and other vulnerable groups.

Slack -- the underutilization of factors of production -- varies systematically with economic development. Using novel and detailed measures of the utilization of labor and capital from a large representative sample of firms in rural and urban Kenya, we show that utilization is increasing in firm size, market access, and economic activity. We present a model of firm capacity choice where indivisibility in at least one input is a key driver of slack. We embed the model in spatial general equilibrium, with features characteristic of low-income settings -- including many small firms and high transport costs -- and show that it rationalizes both the endogenous emergence of slack in steady-state and elastic aggregate supply curves. We empirically validate model predictions using reduced-form estimates of the general equilibrium effects of cash transfers from a large-scale RCT in Kenya. The parsimonious model replicates much of the experimental evidence, predicting a large real multiplier of 1.5, driven by expansion in low-utilization sectors and firms, and limited average price inflation. Counterfactual analyses indicate that multipliers are likely to be meaningfully smaller in lower slack settings, such as urban areas. We use the model to revisit the estimation of spatial spillovers in clustered RCTs and uncover non-trivial 'missing intercept' effects on income and inflation. Additionally, we innovate methodologically by pre-registering key elements of model estimation and validation. The findings suggest that input indivisibilities and slack are key features of developing country settings, and are quantitatively important for macroeconomic dynamics and policies.

We combine a new collection of microdata from China with a natural experiment to investigate the extent to which reductions in rural-urban migration barriers affect flows of trade and investment. We find that increases in worker eligibility for urban residence registration (Hukou) across origin-destination pairs increase rural-urban exports, imports, capital inflows and outflows, both in terms of bilateral transaction values and the number of unique buyer-seller matches. To quantify the relationship between changes in migration costs and market integration in trade and investment at the regional level, we then interpret these estimates through the lens of a spatial equilibrium model with buyer-seller matching frictions that can be reduced through migration linkages. We find that a 10% increase in a rural county’s migration market access leads to a 1.5% increase in the county’s trade market access and a 2.5% increase in investment market access. In the context of China’s recent Hukou reforms, we find that these additional gains from trade were on average larger among the urban destinations compared to the rural origins, reinforcing incentives for rural-urban migration. 

We study the effects of migrant networks on the labor market integration of refugees, the performance of local firms, and the wages of their employees in Switzerland. To track outcomes of individuals and firms, we link six employer-employee matched administrative datasets covering the universe of residents (citizens, migrants, and refugees) and registered firms from 2008 to 2017. Leveraging the quasi-random placement of refugees across locations and a novel IV strategy, we show that larger local networks persistently increase employment and income of refugees. Network effects are large, accounting for 38% of the variation in incomes within nationality cohorts across cantons. In line with homophily, demographically similar networks and economically successful peers have larger positive impacts. Network effects are shaped by direct personal contacts: refugees who quasi-randomly lived in the same residential center are three times more likely to become co-workers at the same firm. Using a shift-share IV design, we then show that firms experiencing a positive shock to their employee’s network hire both more migrants and natives. Their wage bill and the average wages of existing employees grow, and high-skilled natives rise within the firm hierarchy. This is consistent with referrals improving firm-worker match quality and productivity. Concerns about adverse economic impacts of spatially concentrated immigration are not borne out in the data, suggesting that existing migration policies in Switzerland and other high-income countries may need to be reconsidered.

This paper identifies the impact of a shock to adolescent schooling—potentially affecting both childcare burdens and child labor—on adult labor supply and intra-household allocation of productive activities in the context of COVID-19-related school closures in Kenya. We compare changes in outcomes after schools partially reopened in October 2020 for households with children in a grade eligible to return against those with children in adjacent grades. Using nationally-representative bi-monthly panel data, we find that a child returning to school increases adults’ weekly work by 4.3 hours (27%) in the short run, concentrated among the most flexible margins of adjustment and particularly household agriculture. Contrary to evidence from high-income settings, overall effects are not gendered. We find no effects of the partial reopening on respondent childcare hours and heterogeneity in labor supply effects by household characteristics generally does not align with predictions based on a childcare mechanism. Instead, the results indicate that increased adult work hours substitute for reduced child work in household agriculture as a child goes back to school. Impacts on labor supply are driven by less wealthy households with children engaged in household agriculture, while wealthier agricultural households substitute child labor with increased hired labor. Our results show that adolescent schooling has important consequences for household production and labor supply decisions. Poor agricultural households face particularly high opportunity costs for children’s education.