Posted by: Dirk | November 1, 2008

Basic Income Grants in Otjivero, Namibia

The discussion of whether paying a basic income grant to further development in poor communities is boon or bane is old. However, there is a project now in Otjivero, Namibia, where every citizen gets 8 euros monthly (except for pensioners). A first assessment report has been published. Here’s one of the main findings (p. 70):

The results show that average real income from work rose for this group from $267 to $308 over the period. In other words, the introduction of the BIG did not result in people stopping working (as some critics stated) – but rather facilitated an increase in employment and income. This does not mean, of course, that everyone’s income rose. As shown in the table below, some people’s income also fell. The key point, however, is that more people experienced an increase in income than a decline, and more people were working after the introduction of the BIG than before.

It will be interesting to see how this project turns out. It reminds of Progresa/Oportunidades in Mexico, where parents get money if they keep their children in school.

UPDATE 02/11/2008: Edge.org features a related story, offered by Sendhil Mullainathan:

I want to close a loop, which I’m calling “The Irony of Poverty.” On the one hand, lack of slack tells us the poor must make higher quality decisions because they don’t have slack to help buffer them with things. But even though they have to supply higher quality decisions, they’re in a worse position to supply them because they’re depleted. That is the ultimate irony of poverty. You’re getting cut twice. You are in an environment where the decisions have to be better, but you’re in an environment that by the very nature of that makes it harder for you apply better decisions.

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