Consumption and borrowing: Land-holding inequality and the effects of cash transfers

Shaw, Abhishek and Rathi, Sawan and Chakrabarti, Anindya S. (2025) Consumption and borrowing: Land-holding inequality and the effects of cash transfers. The Journal of Economic Inequality. ISSN 1569-1721

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Abstract

A rich literature shows that in developed countries, cash windfalls increase consumption and are often used to pay off debt. Does inequality influence how cash transfers affect consumption and borrowing, in developing countries? In this paper, we study an unconditional cash transfer program for agricultural landowners in India in a quasi-natural experiment set up. In aggregate, cash transfers led to an increase in consumption alongside increase in borrowings on the extensive margin. Farmers with large land holdings increased only bank borrowings, whereas small and marginal farmers increased both consumption and borrowing from banks – with heterogeneous effects across quartiles. There are no effects on landless agricultural laborers. These effects appear after cash disbursement and not when the announcement was made. Our results suggest that as landholding size increases, households tend to respond more through formal borrowing than consumption.

Item Type:	Article
Authors:	Shaw, Abhishek and Rathi, Sawan and Chakrabarti, Anindya S.
Document Language:	Language English
Subjects:	Social sciences > Economics Social sciences > Economics > Macroeconomics & related topics Social sciences > Economics > Macroeconomics & related topics > Factors affecting income and wealth
Divisions:	Azim Premji University - Bengaluru > School of Arts and Sciences
Full Text Status:	None
URI:	http://publications.azimpremjiuniversity.edu.in/id/eprint/6911
Publisher URL:	https://doi.org/10.1007/s10888-025-09691-8

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