When Less Cash Benefits Children More

Low-income children lag behind better-off children in many developmental factors because of their socioeconomic status. These children lack investment in key nutritional, medical and educational factors. Gaps like these persist through life. A child who starts behind, stays behind.

A Way Forward?

One potential way policymakers can lessen these resource constraints is through Conditional Cash Transfers (CCTs). CCTs give cash to households if they meet a certain condition, such as sending their child to middle school or high school or using medical services in their village. The goal of these conditions is that households receive enough cash to offset the cost of education (travel, uniforms, materials) or the loss of income from a job (the opportunity cost), and invest in their child. The existing literature shows that CCTs have positive impacts in the use of health and school attendance services, but mixed effects on child development. There is even less evidence about the effect of conditions on early childhood development outcomes.

Bono 10000 was a CCT program introduced in Honduras in 2010. The aim of the program was to break the inter-generational cycle of poverty by promoting investments in the human capital of children in poor households. Incentives were set to increase the usage of education and health services among these children.

The CCT was Structured as Two Types of Transfers

The educational transfer (Bono Educación) provided a monetary transfer to eligible households with at least one child between the ages of 6 and 18, who had not completed the ninth grade, and only if she or he was enrolled in school. In households with two or more children in that age group, the program only required one of them to fulfill the condition in order to receive the transfer. The educational transfer amounted to 10,000 lempiras (US$500) per year, regardless of the number of eligible children in the household.

The other transfer was the Bono Salud. They received a smaller “health” transfer of 5,000 lempiras ($250 USD) if children under 5 —without an older sibling— visited local medical centers for checkups.

An existing study by our colleague Pablo Ibarrarán found that the extra cash provided by Bono 10000 led to increased school attendance for older children and more health checkups for younger children.

Do Cash Transfers Work for Young Children’s Outcomes?

Our  recent publication in the journal Economía, Cash, Conditions and Child Development: Experimental Evidence from a Cash Transfer in Honduras, aimed to determine whether the governmental effort to reduce inequalities worked for very young children. We targeted two separate questions:

1. Does the cash improve these children’s developmental outcomes? Are they talking more, solving problems better?
2. Which of the two conditions matter more?

Download the free publication here.

We found that children’s outcomes improve. The impact is driven by the effect of the CCT on the language domain of the ASQ-3 test, a commonly used measure of early childhood development. This result is consistent with past studies which show that language can be influenced by policies. It also appears that the CCT slightly changed certain behaviors that might affect children, such as decreased probability of maternal employment, which likely provides moms with more time to interact with their kids, and increased maternal self-esteem.

In relation to our second question, we identified heterogeneous impact by type of transfer. The impact on children from families receiving the US$250 “health” transfer was large (one third of a standard deviation), specifically on the problem-solving domain of the test. However, children from families receiving the US$500 “education” component of the transfer did not benefit at all.

These differential results seem to be explained by differences in conditions. While the “education” component only imposed conditions on school-age children in the household, the “health” transfers required regular health checkups for children aged 0-5, for which we measured child development outcomes. The “health” transfer families were more likely to attend health checkups. This increased exposure to medical/paramedical advice may have encouraged healthy behaviors, including a shift in spending towards more nutritious items, which in turn may have contributed to the observed improvement in child health and cognitive development.

Less Cash is Better?

This finding is important because it shows that while cash matters for early childhood development, smaller per capita transfers may be better at closing gaps between children of different socioeconomic class.

This result points to the importance of the interaction between conditions, cash and policy. Along with previous studies, it emphasizes the importance of strong, well targeted conditions for final outcomes. Altogether, the findings encourage policy makers and researchers to craft policy which targets young children’s development and uses conditions to foster the best outcomes for children and their households.

Do these results surprise you? Tell us what you think in the comments below or mention @BIDGente on Twitter.