A new study has examined various ways to tackle poverty in Ethiopia, showing that while cash helps, the impact of therapy is less clear. Cash transfers have become one of the most widely used tools for reducing poverty around the world. Economists, though, are still looking for ways to produce longer-term impact, which is the core idea behind this new study from Ethiopia. Researchers tested whether pairing cash with mental health counseling could help people build more stable lives. However, when an ongoing conflict spread into some of the villages in the program, it produced unexpected results.
In low-income settings, poverty and mental health are often locked in a vicious cycle, says Melissa Hidrobo, a senior fellow with the International Food Policy Research Institute. Hidrobo explained: "Poor mental health can impair your decision-making. It can reduce your productivity. At the same time, the stresses of poverty, such as not having enough food to eat, can also exacerbate ill mental health."
The initiative began in 2022 when the aid organization World Vision received funding from the U.S. Agency for International Development, which has now been dismantled by the Trump administration. The goal was to improve the lives of poor households in Ethiopia, and Hidrobo joined the initiative as the lead researcher. Hidrobo stated, "What we wanted to see, as researchers, was whether interventions that target poverty and also mental health are more effective."
In about 250 villages across the Amhara and Oromia regions of Ethiopia, households were divided into four groups. One group received nothing. The second group had group therapy only, while a third group got cash in a lump sum of $279. The last group received both the cash and the therapy. The therapy was designed to broadly address issues of depression, stress, and anxiety. But then something else happened that the researchers had not foreseen, says Michael Mulford, the senior director of the Global Poverty Research Lab at Northwestern University, who was in Ethiopia as the project manager for World Vision.
Mulford explained, "There was a conflict that spilled over into the Amhara region and significantly affected all of our operational areas." Armed groups would enter the villages, terrorizing people and often robbing them. Mulford was present in many of the group therapy sessions in the conflict zone and witnessed how the situation exacerbated stress and led to a lack of sleep and appetite. Mulford recalled, "One of the women talked about how her husband had died due to the conflict, was really depressed and withdrawn and, you know, kind of unable to think about what to do next."
The interventions lasted until 2024, and researchers collected data immediately after, says Hidrobo. Hidrobo noted, "We saw large improvements in the group on mental health of the group therapy." Then they collected more data sixteen months later. Hidrobo explained, "Sixteen months later, we no longer saw those. And so I think that was one of the big surprises."
In the long term, households that only received therapy did not see improvements in income or productivity. By contrast, people who received the cash alone had done much better, investing in livestock and savings. And those who received both cash and therapy had a slight income edge. For those in the conflict setting, therapy was not effective at all.
Frank Schilbach, who studies behavioral economics at MIT and was not involved in the study, says he wants to know more about how cost-effective the initiative was so policymakers could take that into account. But he also thinks the research has important insights. Still, he says the therapy didn't lead to transformative results. Schilbach stated, "It's not enough to take a population that's psychologically distress without providing them, also, with a lot of opportunities." These include things like more education or job opportunities so they can take advantage of the mental health support. Additionally, he says poor people who are also dealing with conflict might need more specialized psychological help. Researchers say they hope to get more opportunities to further study the effect of cash and therapy in a variety of settings.
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TANIS: Then they collected more data 16 months later.
