Own and Sibling Effects of Conditional Cash Transfer Programs: Theory and Evidence from Cambodia1

Conditional cash transfers (CCT) have been adopted in many countries over the last two decades. Although the impacts of these programs have been studied extensively, understanding of the economic mechanisms through which cash and conditions affect household decisions remains incomplete. In particular, relatively little is known about the effects of these programs on intra-household allocation decisions. This chapter uses evidence from a program in Cambodia, where eligibility varied substantially among siblings in the same household, to illustrate these effects. A simple model of schooling decisions highlights three different effects of a child-specific CCT: an income effect, a substitution effect, and a displacement effect. The model predicts that such a CCT should unambiguously increase enrollment for eligible children, but have an ambiguous effect on ineligible siblings. The ambiguity arises from the interaction of a positive income effect with a negative displacement effect. These predictions are shown to be consistent with evidence from Cambodia, where the CESSP Scholarship Program (CSP) makes modest transfers, conditional on school enrollment for children of middle-school age. Scholarship recipients were more than 20 percentage points more likely to be enrolled in school, and 10 percentage points less likely to work for pay. However, the school enrollment and work of ineligible siblings was largely unaffected by the program. A possible fourth effect, operating through non-pecuniary spillovers of the intervention among siblings, remains largely outside the scope of the analysis, although there is some tentative evidence to suggest that it might also be at work.