Reassessing Conditional Cash Transfer Programs

Abstract

During the past decade, the use of conditional cash transfer programs to increase investment in human capital has generated considerable excitement in both research and policy forums. This article surveys the existing literature, which suggests that most conditional cash transfer programs are used for essentially one of two purposes: restoring efficiency when externalities exist or improving equity by targeting resources to poor households. The programs often meet their stated objectives, but in some instances there is tension between the efficiency and equity objectives. The overall impact of a program depends on the gains and losses associated with each objective. The use of conditional cash transfer programs as a means of combating poverty has increased dramatically in the past decade. Programs such as Progresa (now called Oportunidades) in Mexico, Bolsa Escola (now called Bolsa Familia) in Brazil, and the Red de Proteccion Social in Nicaragua aim to balance the goals of current and future poverty reduction by providing cash to finance immediate consumption and fostering investment in human capital. Several evaluations show that these programs are technically feasible in that the main stated goals of the programs are actually met in practice and are politically acceptable in that successive governments are willing to continue and even expand program coverage. These results have been a source of encouragement for researchers and policymakers in the development community. Some studies suggest, however, that households would behave very differently if given an equivalent amount of cash with no strings attached: Households would consume less of the conditioned-on good and more of other commodities. In western Kenya, for instance, the incidence of malaria decreased when households were given insecticide-treated bednets (Nahlen and others 2003). But when households were asked what they would do if given an equivalent amount of cash, their priorities were different. They would have spent the cash on food and clothing-bednets

Children’s Schooling and Work in the Presence of a Conditional Cash Transfer Program in Rural Colombia

“…Modeled on the Mexican PROGRESA (now Oportunidades), it consists of conditional subsidies for investments into education, nutrition, and health. Such interventions are typically justified by positive externalities that human capital might confer, by the existence of liquidity constraints, and/or by other reasons such as excessive discounting of the future utility of children by parents or myopia (see Das, Do, and Ozler [2005] for a synthesis of the theoretical arguments underlying conditional cash transfers). While positive externalities could justify making the transfer conditional, that is, paid only if the household complies with certain conditions, an unconditional transfer should be sufficient to overcome liquidity constraints.…”

Role of cash in conditional cash transfer programmes for child health, growth, and development: an analysis of Mexico's Oportunidades

“…4 CCTs use cash transfers as incentives for parents to invest in their children's health and wellbeing so that their children will have the capabilities to be able to escape poverty when they reach adulthood. 11 There is substantial evidence that in the short term, CCTs improve health and nutritional outcomes for children early in life, [12][13][14] and that these outcomes are achieved in part due to increased use of preventive services mandated by program participation. 8 However, no published studies to date have looked at the impact of CCTs on child cognitive, language or motor development.…”

The experience of conditional cash transfers: Lessons for REDD+ benefit sharing

“…Economic rationale suggests that there are market failures causing individuals or families to underinvest in human or social capital (Das et al 2005;Fiszbein and Schady 2009). A CCT program, thus, addresses the underlying market failure and in the process reconciles societal preferences and individual choices.…”

“…When households in Ecuador and Mexico did not think that the cash transfer program was conditional on school attendance, school enrollment was significantly lower (Baird et al 2011). According to Das et al (2005), households in western Kenya who were given cash conditional on purchase of insecticide-treated bednets and had seen decreased incidences of malaria as a consequence, would still have chosen to spend the equivalent cash on other priorities (such as food and clothing) if given the choice.…”

“…A second economic rationale for CCT programs is to achieve equity outcomes in targeting and pro-poor redistribution of resources (Das et al 2005). Much of the empirical literature on CCT programs focuses on the two rationales, but there can be tension between the efficiency and equity objectives.…”