Do Cash Transfers Crowd Out Community Investment in Public Goods? Lessons from a Field Experiment on Health Education

This article discusses voluntary contributions to health education in Peru, using a new experimental setup to identify voluntary contributions to local public goods. The experiment enables individuals to contribute to a health education meeting facilitated by an NGO, which they know will only be organized if the cumulative investment level exceeds a certain threshold value. In contrast to expectations of aid distributors, individuals contributed a substantial amount of money, despite the supposed long-term nature of the benefits. The result suggests that donor paternalism, undermining the agency of beneficiaries to exercise control over funds, is not always necessary to guarantee investment in local public goods. We explore multiple interpretations, suggesting that "unaccounted for" short-term benefits from participation as well as liquidity and paternalistic altruism add to explaining the relatively high investment. More in general, the article shows the potential for using experimental research methods in the area of nonprofit management.