Abstract

Unconditional cash transfers are a popular social protection policy, but their impact is often short-lived. One plausible explanation is that recipients struggle to budget and plan, leading to insufficient savings for future productive investments. Through an RCT involving 861 refugee households in Uganda, we test whether a mental accounting intervention—where households divide their monthly cash transfer across four labeled envelopes (Education, Health, Investments, Others), instead of the status quo of one
unlabeled envelope—can help recipients overcome commitment challenges. Immediately after the cash transfer program ends, Treatment households exhibit greater savings and have taken out larger loans. One year later, these households have made more productive investments, particularly in lumpy investments, resulting in higher monthly income and savings, while also paying off their debt. These outcomes are driven by households that continue using the labeled envelopes one year after the cash transfer program ends, who are also more likely to report that the envelopes help with budgeting, planning, and disciplining spending.

Supported by the Luxembourg National Research Fund (PRIDE19/14233191).