Conditional cash transfers : reducing present and future poverty

TLDR: Conditional cash transfers (CCTs) are programs that transfer cash, generally to poor households, on the condition that those households make pre specified investments in the human capital of their children.

Abstract: Conditional cash transfers (CCTs) are programs that transfer cash, generally to poor households, on the condition that those households make pre specified investments in the human capital of their children. The report shows that there is good evidence that CCTs have improved the lives of poor people. Transfers generally have been well targeted to poor households, have raised consumption levels, and have reduced poverty, by a substantial amount in some countries. Offsetting adjustments that could have blunted the impact of transfers, such as reductions in the labor market participation of beneficiaries, have been relatively modest. The report also considers the rationale for conditioning the transfers on the use of specific health and education services by program beneficiaries. Thus CCTs have increased the likelihood that households will take their children for preventive health checkups, but that has not always led to better child nutritional status; school enrollment rates have increased substantially among program beneficiaries, but there is little evidence of improvements in learning outcomes. These findings suggest that to maximize their potential effects on the accumulation of human capital, CCTs should be combined with other programs to improve the quality of the supply of health and education services, and should provide other supporting services.

Figures

Figure 1.1 CCTs in the World, 1997 and 2008

Table 1.2 Implementation of “Similar” Programs: Contrast between Mexico and Brazil

Table 1 Matrix of Program Size and Extent of Conditions

Table 4 continued

Table 5.2 continued

Table 1.1 Matrix of Program Size and Extent of Conditions

Frequently asked questions

Q1. Why are CCTs better suited for structural poverty than as responses to episodes of transient?

Because of their emphasis on long-term human capital accumulation and on administrative targeting, CCT programs are better suited as instruments for structural poverty than as responses to episodes of transient poverty. 

Q2. What can be done to help policy makers identify and quantify the trade-offs?

Structural modeling and small-scale experimentation can help policy makers identify and quantify the trade-offs (Bourguignon, Ferreira, and Leite 2003; Attanasio, Meghir, and Santiago 2005; Todd and Wolpin 2006a). 

Q3. Why are CCT programs not a feasible option for some groups among the poor?

Because of their focus on building the human capital of poor children, CCT programs are not a feasible option for some groups among the poor, such as the elderly poor, poor households without children, or households with children outside the age range covered by the CCT. 

Q4. What is the implication of targeting payments to mothers?

The implication is that if mothers really do have a preference for girls, targeting payments to mothers would result in some form of discrimination against boys. 

Q5. What is the way to smooth the fl uctuations?

When incomes are volatile, refl ecting a risky economic environment, cash transfers can smooth (some of) the fl uctuations, raising household welfare. 

Q6. What countries have temporarily increased the level of payments to CCT benefi ciaries?

Several Latin American countries (including Chile, Ecuador, and Mexico) temporarily have increased the level of payments to CCT benefi ciaries. 

Q7. What are the main reasons why CCTs are not the instrument to deal with transient?

But their focus on long-term investments in human capital and their reliance on administrative targeting mean that CCT programs generally are not the best instrument to deal with transient poverty. 

Q8. What are the key design features that are needed to make a CCT program an efficient instrument?

assuming that a decision has been made to have a CCT, the second section of the chapter considers the key design features that can be used to make the program an efficient instrument: the selection of beneficiaries, the nature and enforcement of conditions, and the level of benefi ts. 

Q9. What is the third area where further research is important?

The third area where further research is important relates to the impact of CCTs in very different settings or on outcomes that have not yet been studied. 

Q10. How many households do not comply with their assignment?

As with other CCTs, the score on the proxy means is a signifi cant but imperfect predictor of treatment: about 9 percent of households do not “comply” with their assignment (either eligible households that do not receive transfers, or ineligible households that do receive them). 

Q11. What is the effective instrument to correct for externalities?

How large these externalities are and whether (conditioned) cash transfers are the most effective instruments to correct for them, however, remains to be determined.