The Marginal Value of Public Funds for Unconditional Cash Transfers in a Developing Country: Evidence from Kenya

Abstract

Governments worldwide spend over \$500 billion annually on cash transfers, yet no welfare metric exists for comparing transfer efficiency across developing and developed countries. This paper constructs the first Marginal Value of Public Funds (MVPF) estimate for a developing-country cash transfer, applying the framework to Kenya's GiveDirectly program. Drawing on two landmark randomized experiments— (1,372 households) and (10,546 households, 653 villages)—I estimate an MVPF of 0.87 for direct recipients, rising to 0.92 with general equilibrium spillovers to non-recipients. Kenya's UCT falls between the US Earned Income Tax Credit (0.92) and TANF (0.65), despite an economy where 80 percent of employment is informal and fiscal externalities are an order of magnitude smaller than in developed economies. Correlated bootstrap inference over the joint distribution of consumption and earnings effects confirms narrow confidence intervals driven by the mechanical certainty of cash WTP. A new government implementation analysis, calibrated to Kenya's Inua Jamii safety net, shows that MVPF drops from 0.87 under NGO delivery to 0.55 under high-cost government implementation—making delivery quality a first-order policy concern. Sensitivity analysis across 15 parameters, three functional forms for effect decay, and the full correlation structure of treatment effects yields a plausible MVPF range of [0.48, 0.97]. The binding constraint is not transfer design but fiscal capacity: Kenya's informal economy limits the tax recapture that makes transfers efficient in rich countries.