Community Development: The Effects of Interdependence on Spending

Abstract:

 

The movement of Effective Altruism and social impact investing signifies a shift in philanthropy towards measured impact. GiveDirectly, a nonprofit organization that facilitates unconditional cash transfers to the poor in Kenya and Uganda, operates under the reasonable premise that poor people know what makes them better off. Microfinance institutions operate under the same assumption and provide low-interest loans to the poor. Models of providing poor people with funds through unconstrained donations or microloans tout how the funds are often used to start businesses. Research suggests that this is true in practice[1] and, more importantly, that business creation is an important component of economic development[2].

These models, however, neglect the influence of culture on the use of funds. Some empirical research has already shown that culture influences how people spend money[3]. It is plausible that members of ‘interdependent’ communities allocate a smaller proportion of their income to personal spending due to a social stigma in comparison to ‘individual’ communities. This phenomenon plausibly extends to the use of unconstrained funds that are either donated or loaned. This research project will study the relationship between cultures of interdependence and spending. It will investigate the question: how does interdependence in a community influence the ways in which community members spend donated or loaned funds?

 

 

[1] Canales, Rodrigo, Dean Karlan, and Tony Sheldon. "What Are the Realities of Microfinance?" Yale School of Management. N.p., 20 Sept. 2016. Web. 18 Dec. 2016.

 

[2] Szirmai, Adam, Wim Naudé, and Micheline Goedhuys. "Entrepreneurship, Innovation, and Economic Development: An Overview." Entrepreneurship, Innovation, and Economic Development (2011): 3-32. Web.

[3] Boris, Cynthia. "New Study Shows Cultural Impact on Shopping Habits." Marketing Pilgrim Links RSS. N.p., 3 July 2013. Web. 18 Dec. 2016.

 

Last updated on 05/10/2018