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Efficient delivery of subsidies to the poor: Improving the design of a cash transfer program in Ecuador

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  • Carrillo, Paul E.
  • Ponce Jarrín, Juan

Abstract

Many governments provide monetary transfers to low-income families. The mechanism through which these subsidies are distributed may contain several inefficiencies that diminish the net-value obtained by the recipients. In this paper, we build and estimate a behavioral dynamic model that allows us to evaluate the efficiency of current and alternative distribution mechanisms. The proposed model is simple and resembles the individual's decision to collect the transfer. To estimate it, we use data from a cash transfer program in Ecuador where recipients incur high transaction costs each time they collect their benefits. Despite its simplicity, our model is able to replicate the observed data remarkably well. We use it to simulate alternative payment mechanisms and show that an adequate design of the delivery of payments can substantially increase the value of cash transfer programs.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 90 (2009)
Issue (Month): 2 (November)
Pages: 276-284

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Handle: RePEc:eee:deveco:v:90:y:2009:i:2:p:276-284

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Related research

Keywords: Cash transfer programs Behavioral model Distribution of payments;

References

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  1. Behrman, Jere R & Sengupta, Piyali & Todd, Petra, 2005. "Progressing through PROGRESA: An Impact Assessment of a School Subsidy Experiment in Rural Mexico," Economic Development and Cultural Change, University of Chicago Press, vol. 54(1), pages 237-75, October.
  2. Michael P. Keane & Kenneth I. Wolpin, 1994. "The solution and estimation of discrete choice dynamic programming models by simulation and interpolation: Monte Carlo evidence," Staff Report 181, Federal Reserve Bank of Minneapolis.
  3. Paxson, Christina & Schady, Norbert, 2007. "Does money matter ? The effects of cash transfers on child health and development in rural Ecuador," Policy Research Working Paper Series 4226, The World Bank.
  4. Schady, Norbert & Araujo, Maria Caridad, 2006. "Cash transfers, conditions, school enrollment, and child work : evidence from a randomized experiment in Ecuador," Policy Research Working Paper Series 3930, The World Bank.
  5. FranÁois Bourguignon & Francisco H. G. Ferreira & Phillippe G. Leite, 2003. "Conditional Cash Transfers, Schooling, and Child Labor: Micro-Simulating Brazil's Bolsa Escola Program," World Bank Economic Review, World Bank Group, vol. 17(2), pages 229-254, December.
  6. Keane, Michael P & Wolpin, Kenneth I, 1997. "The Career Decisions of Young Men," Journal of Political Economy, University of Chicago Press, vol. 105(3), pages 473-522, June.
  7. Mauricio Leon & Stephen Younger, 2007. "Transfer payments, mothers' income and child health in ecuador," Journal of Development Studies, Taylor & Francis Journals, vol. 43(6), pages 1126-1143.
  8. Rawlings, Laura B. & Rubio, Gloria M., 2003. "Evaluating the impact of conditional cash transfer programs : lessons from Latin America," Policy Research Working Paper Series 3119, The World Bank.
  9. Keane, Michael P & Wolpin, Kenneth I, 2001. "The Effect of Parental Transfers and Borrowing Constraints on Educational Attainment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 1051-1103, November.
  10. repec:idb:brikps:14378 is not listed on IDEAS
  11. Paul Schultz, T., 2004. "School subsidies for the poor: evaluating the Mexican Progresa poverty program," Journal of Development Economics, Elsevier, vol. 74(1), pages 199-250, June.
  12. Berkovec, James & Stern, Steven, 1991. "Job Exit Behavior of Older Men," Econometrica, Econometric Society, vol. 59(1), pages 189-210, January.
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Cited by:
  1. Ariel Fiszbein & Norbert Schady & Francisco H. G. Ferreira & Margaret Grosh & Niall Keleher & Pedro Olinto & Emmanuel Skoufias, 2009. "Conditional Cash Transfers : Reducing Present and Future Poverty," World Bank Publications, The World Bank, number 2597, October.

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