receiving cash transfers, leading to the rejection of the perfect risk sharing hypothesis, while the presence of crowding out effects on private arrangements is confirmed for gifts and (to a lesser extent) remittances, but not for informal loans.

The analysis is based on the Mchinji Social Cash Transfer Pilot Scheme<sup>3</sup> , one of the first social protection experiments in Sub-Saharan Africa and considered to be a major tool for poverty reduction in the Government of Malawi’s National Social Protection Policy. The Scheme covers more than 3,000 households living in rural villages in the Mchinjii area (central Malawi) and has the objective to alleviate poverty, reduce malnutrition and improve school enrolment among the poorest 10% of households through regular and reliable cash transfers. From an econometric perspective, most of the studies of the crowding out effect suffer from important endogeneity problems due to the so-called “program placement effect” (Rosenzweig and Wolpin, 1994)<sup>4</sup> . In this paper we avoid such effect by exploiting the source of exogenous variation given by the randomized design of the dataset, which allows us to properly isolate the effect of cash transfers on the recipients’ welfare. We first assess the type of risk sharing arrangements (i.e. perfect, partial or autarchy) existing at village level by measuring the impact of unconditional cash transfers on households’ consumption expenditures, controlling for aggregate resources. Then we assess how previously existing arrangements based on private inter-household transfers are affected by the introduction of public transfers. To this aim, the dataset distinguishes between three different types of private transfers: 1) gifts (i.e. monetary or in-kind transfers without any repayment expectations attached), 2) loans (i.e. monetary transfers with mandatory repayment) and 3) remittances (monetary transfers from household members living abroad), thus leading to a better understanding of how crowding out effects may differ according to the type of private transfer.

The contribution of this paper to the academic and institutional debate on social protection policies is twofold: first, it suggests that there might be a role for public interventions aiming at helping households to pool risk more effectively as it shows that the perfect risk sharing hypothesis (once again) does not represent a proper description of the reality, even with reference to small village economies deeply affected by the HIV/AIDS epidemic. Second, it provides empirical support to the analysis of the interaction of public programs and private transfers, showing how certain types of transfers (i.e. gifts and remittances) are more likely to be crowded out than others

> 3 For further details on the program see www.childpolicyresearch.org 4 Typically, public programmes are targeted towards households that are in particular need of transfers and this makes it difficult to identify the net effect of public transfer programmes on private transfers and to assess what the level of private transfers would have been in the absence of a given programme comparing beneficiaries to non-beneficiaries.

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