There is growing movement among development organizations to simply give money directly to poor households in developing countries. These unconditional cash transfers seem to be relatively low cost to administer and have less leakage and corruption. Some have argued that the increased availability of unconditional cash transfers as a means of delivering money to the poor will put greater pressure on those administering traditional forms of foreign aid to prove that it is effective. If this is true how might unconditional cash transfers affect the amount of traditional foreign aid given out and its minimum effectiveness at the margin?
▸ The availability of unconditional cash transfers raises the opportunity cost of traditional forms of aid, lowering the amount of traditional foreign aid given and increasing the minimum benefit traditional foreign aid must achieve.
▸ Unconditional cash transfers will increase the overall demand for traditional foreign aid, increasing the quantity of traditional and increasing the minimum benefit it must achieve.
▸ Unconditional cash transfers will lower the opportunity cost of traditional forms of aid, increasing the quantity of traditional foreign aid and lowering the minimum benefit it must achieve.
▸ Unconditional cash transfers will lower the demand for traditional foreign aid, lowering the quantity of foreign aid and lowering the minimum benefit that it must achieve.
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