Discussion
externality
Islamic Republic of Afghanistan ended on August 15, 2021 (
In contrast, the results of this study have shown that the effect of a non-trivial cash grant on income is substantial in Afghanistan. The percentage of increased annual income to the size of this cash grant almost two years after receipt of the cash grant was approximately 173% for males and 69% for females. The treatment group had a 7 percentage point higher probability of having an officially registered business than the control group. The treatment group also increased labor supply and employed additional workers, compared to the control group. The male treatment group bought more capital equipment (e.g., trike and commercial carts) than the male control group, while the female treatment group bought more domestic animals. Our results are consistent with the previous studies in other countries which similarly show a positive effect of cash grants on income (
We would like to emphasize, however, that this study had some limitations. First, the endline survey was conducted almost two years after the study. Thus, the short-term effect of cash grants was measured.
 As we discussed in the introduction, initially we had a concern that giving cash grants may not enhance economic activities in Afghanistan due to negative perception toward women's business and the prevalence of corruption. First, our estimation results show that although the effect of the cash grant on female individuals is lower than the effect of the grant on male individuals, the effect on earnings of female individuals is strong enough to justify the cash grant. Second, despite the prevalence of corruption in Afghanistan, the effect of the cash grant is strong. One possible reason for the effectiveness of this program might be through the transparency of the selection of the recipients of the cash grants. For choosing the recipients of the cash grant, the project paid special attention to the lottery process so that they were determined randomly. This implies that although the lottery process prevents the project from choosing the best candidates, it also prevents the project from choosing corrupted, incapable individuals, which often happen in the government contracts in Afghanistan (
Fourth, in this experiment, the receipt of the cash grant is randomized at each individual level instead of each village level. This implies that if there is a positive (negative) externality of the cash grant and if treatment individuals and control individuals tended to live in the same village, the effect of the cash grant is underestimated (overestimated). In our context, a positive externality is likely if the recipient of the cash grant starts a new business, employs other individuals and increases the income of other individuals as well as his/her own income. A negative externality is likely if the recipient of the cash grant starts a new business and a new entry to an existing market decreases the profit of the control individuals. In other studies, using GPS information of each individual, we examined how the distance of each individual to the nearest treatment individual affects the estimated coefficient of the cash grant dummy. We found that there is no systematic correlation between the distance and the estimated size of the coefficient of the cash grant dummy. This suggests that it is unlikely that the experimental design that uses individual level randomization induce a systematic bias.  According to International Monetary Fund (IMF), the lending interest rate in Afghanistan in 2016 was 15% (
