Crowding-out Effect of Cash Transfer Programs on Inter-household Transfers: Evidence from Indonesian Family

Abstract

Inter-household transfers have important role in developing countries landscape. Many people in developing countries must depend on financial transfer from their family as main source of any kind of social security. In a society with kinship ties are still strong, informal private transfers has a function as service providers and social security safety net during economic crises. The presence of the public transfer is expected to be neutralized (crowd-out) by the response of private transfers. This paper aims to examine existence of crowding-out effect of public transfer on private transfer using data from Indonesia Family Life Survey (IFLS). By controlling for any characteristic respondent and cultural background, the empirically results show that crowding-out effect is statistically significant. As a suggestion, identification of the target domestic anti-poverty programs should also include family tie variables as the key variable.

Keywords: crowding-out, public transfer, private transfer, Indonesia