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    This blog highlights effective ideas in the fight against poverty and exclusion, and analyzes the impact of development projects in Latin America and the Caribbean.
  • Leaving cash on the table

    15
    Dec
    2016

    By

    By Mario González Flores

    poorest-mexican-households-are-not-benefiting-from-conditional-cash-transfers

    Photo: Getty images.

    If someone offered you cash payments to keep your kids in school, would you turn these down? The answer seems simple enough.  Most of us would respond with a clear “of course not!”  Yet, the answer might not be so simple for the poorest and most vulnerable families.

    Conditional Cash Transfer (CCT) programs pay cash to poor households on the condition that eligible children enroll and attend school regularly (80% of the time). The justification for these cash transfers is the idea that many poor families cannot afford to pay enrollment fees, buy school supplies and uniforms required for attendance, as well as the fact that the opportunity cost of receiving an education is often higher for poorer households; they might prefer to send their kids to work.  In principle, then, providing cash linked to school outcomes should help overcome both constraints and induce greater school attendance. Yet, the link between the provision of a cash transfer and greater school attendance does not always materialize.

    Using administrative data from the urban Mexican Oportunidades program (recently rebranded as PROSPERA), in a recent study my colleagues and I found that many poor households choose less education for their children, even when offered financial compensation for school attendance. We found that each school year, half of recipients forgo income for which they are eligible by failing to send children to school regularly. This raises the question as to why households turn down money when they are eligible to receive it and which households are the ones turning it down?

    We analyzed a representative stratified sample from Oportunidades, which began in two waves—2002 and 2004, to shed light on these questions.

    In general, we found that the poorest households—as defined by a poverty index used by Oportunidadesare less likely to receive the full payment for which they are eligible.

    We also found that households had a lower probability of receiving the full payment if they:

    • had a large dependency ratio (those with many children and senior citizens, but few members of working age);
    • were a large household;
    • had a greater share of students attending junior and senior high school, as opposed to primary school;
    • the caregiver (usually the mother) has no education, is single and working full time.

    Scholarship by Quintiles (Using Poverty Index)

    Scholarship by Quintiles (Using Poverty Index)

    These results indicate that the conditionality of attending school at least 80% of the time applied by the program is working primarily for the least poor households who are investing more in education than the poorest households.  We believe that this might be partly due to poorer households finding it more difficult to invest in schooling as the opportunity costs for older children increases—i.e., it might be more beneficial for older kids to seek work opportunities than to attend school and receive the scholarship, while at the same time poorer households with large dependency ratios and little adult supervision prompt greater demands on older children to help at home.

    We concluded that even when provided with the cash incentives designed to induce school attendance, the poorer households fail to do so. Of course, this has implications for how this failure to attend school regularly affects long-term investment in human capital.

    Taken together, we note that the analysis points toward the need to carefully consider household composition in designing and administrating the program.  As such, special attention should be given to larger families, particularly the poorest, where the pressure to not attend school may be greater.

     

    About the author:

    Mario González Flores is a Senior Evaluation Economist Specialist at the IDB’s Office of Strategic Planning and Development Effectiveness and an Adjunct Instructor at the School of International Service of American University in Washington, D.C.

    For more information on the details of program conditions and schedule of benefits of Oportunidades read:

    González-Flores, M., Heracleous, M., & Winters, P. (2012). Leaving the safety net: an analysis of dropouts in an urban conditional cash transfer program. World Development, 40(12), 2505-2521.


     

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