Bangladesh paid $8.50 to unstick a labor market that would fix itself

the problem

Rural households go hungry between planting and harvest, even though paid work exists elsewhere at that time

background

what everyone would do

The standard development-economics fix for households not taking up a profitable opportunity was to assume they lacked information about it, or needed a larger incentive to overcome risk-aversion — both pointing toward expensive awareness campaigns or large ongoing wage subsidies rather than a one-time, small payment.

what they saw

Researchers saw households weren't refusing profitable work from caution — they were blocked by one small unmet cost: bus fare. Removing exactly that cost, once, unstuck the decision.

the move

Working with the NGO RDRS Bangladesh, economists Gharad Bryan, Shyamal Chowdhury and Ahmed Mushfiq Mobarak randomly gave a subset of Monga-affected households either roughly 1,500 taka (about $8.50) in cash or an equivalent interest-free loan, conditional only on a household member migrating temporarily for seasonal work during the lean season — just enough to cover round-trip transport and a few days' food, not a wage subsidy or a gift for anything else.

why it works

Because the payment is conditional on actually migrating and sized to cover only the real, narrow cost of getting to available work — not a general income boost — it targets the specific constraint blocking the decision rather than throwing money at rural poverty in general. And because migrating for seasonal work turns out to be genuinely profitable once a household can afford to try it, many continued migrating on their own after the subsidy stopped, the clearest evidence the constraint really was the fare and not some deeper unwillingness to migrate at all.

the payoff

The $8.50 incentive raised migration 22 points and lean-season consumption 8-10%, with many still migrating years after it ended.

where it breaks

It only works when the underlying opportunity is genuinely profitable and merely inaccessible because of a small fixed cost — if the destination work doesn't pay enough or isn't reliably available, a travel subsidy just moves people into a bad bet instead of a good one. Later replications in other contexts found smaller or inconsistent effects, suggesting the mechanism depends on local labor-market conditions being favorable enough that the only thing missing really was the fare, which isn't guaranteed to hold everywhere the same intervention is tried.

what came after

The result, published in Econometrica in 2014, became a landmark case in development economics for 'underinvestment in a profitable technology' — showing that removing one small, specific liquidity constraint could unlock a labor-market decision worth far more than the subsidy itself — and the program scaled into Evidence Action's 'No Lean Season' initiative, which GiveWell named a recommended top charity based on this evidence.

references

1. [1]Underinvestment in a Profitable Technology: The Case of Seasonal Migration in BangladeshNational Bureau of Economic Research (published in Econometrica, 2014), 2014nber.org
2. [2]Conditional Subsidies for Seasonal Labor Migration in Northern BangladeshGiveWell, 2023givewell.org

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