The impact of the Kenya Cash Transfer Program for Orphans and Vulnerable Children on household spending

The Kenya Cash Transfer Program for Orphans and Vulnerable Children (CT-OVC) is the government's flagship social protection programme, reaching over 130,000 households and 260,000 orphans and vulnerable children across the country as of late 2011. The objective of this paper is to investigate whether the CT-OVC has changed the preferences of households in terms of their consumption behaviour. We compare standard difference-in-differences programme effects with ex-ante expected effects given baseline expenditure elasticities. As a result of the programme, participating households had significantly higher expenditures than control households on food, health, and clothing and significantly less spending on alcohol and tobacco. Programme impacts were also seen on spending in four of seven food groups. To test whether the programme simply moves households along their total expenditure Engel curve or in fact shifts that curve, we compare ex-ante expected behaviours with the ex-post actual response of households to the programme. We find in fact that in about one-half of the consumption categories ex-ante predicted and ex-post actual effects are significantly different, implying that preferences may have changed among programme recipients. We then directly test whether the programme has induced significant changes in expenditure elasticities (as implied by their associated marginal propensities to consume) and find evidence of this for alcohol and tobacco, and to a lesser extent for food, health and transportation and communication.