Abstract: We use a randomized controlled trial of unconditional cash transfers in Kenya to study the effects of exogenous changes in the wealth of neighbors on psychological wellbeing, consumption, and assets. We find that increases in neighbors’ wealth strongly decrease life satisfaction and moderately decrease consumption and asset holdings. The decrease in life satisfaction induced by transfers to neighbors more than offsets the direct positive effect of transfers, and is largest for individuals who did not receive a direct transfer themselves. We find evidence of hedonic adaptation, in that the negative spillover effect of transfers to neighbors decreases over time, at a rate similar to that of direct transfers.