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Indirect Effects of an Aid Program: The Case of Progresa and Consumption

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  • Angelucci, Manuela

    ()
    (University of Michigan)

  • De Giorgi, Giacomo

    ()
    (Stanford University)

Abstract

Aid programs in developing countries are likely to affect all households living in the treated areas, both eligible and non-eligible ones. Studies that focus on the treatment effect on the treated may fail to capture important spillover effects. We exploit the unique design of an aid program's experimental trial to identify its indirect effect on consumption for non-eligible households living in treated areas. We find that this effect is positive, and that it occurs through changes in the insurance and credit markets: non-eligible households receive more transfers, and borrow more when hit by a negative idiosyncratic shock, because of the program liquidity injection, thus they can reduce their precautionary savings. We also test for general equilibrium effects in the local labor and goods markets, finding no significant changes in labor income and prices, while there is a reduction in earnings from sales of agricultural products, which are now consumed. We show that this class of aid programs has important positive externalities, thus their overall effect is larger than the effect on the treated. Our results confirm that a key identifying assumption – that the treatment has no effect on the non-treated – is likely to be violated in similar policy designs.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1955.

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Length: 49 pages
Date of creation: Jan 2006
Date of revision:
Handle: RePEc:iza:izadps:dp1955

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Keywords: consumption; program evaluation; Progresa;

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References

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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, July.
  2. Anoshua Chaudhuri, 2009. "Spillover Impacts of a Reproductive Health Program on Elderly Women in Rural Bangladesh," Journal of Family and Economic Issues, Springer, vol. 30(2), pages 113-125, June.
  3. Marina Pavan & Aldo Colussi, 2011. "Assessing the Impact of Public Transfers on Private Risk Sharing Arrangements: Evidence from a Randomized Experiment in Mexico," Working Papers 2011/05, Economics Department, Universitat Jaume I, Castellón (Spain).
  4. Armando Barrientos & Rachel Sabatés-Wheeler, 2009. "Do transfers generate local economy effects?," Brooks World Poverty Institute Working Paper Series 10609, BWPI, The University of Manchester.
  5. Rafael Perez Ribas & Fabio Veras Soares & Clarissa Teixeira & Elydia Silva & Guilherme Hirata, 2011. "Externality and Behavioural Change Effects of a Non-randomised CCT Programme: Heterogeneous Impact on the Demand for Health and Education," Working Papers PIERI 2011-19, PEP-PIERI.
  6. Kirk Doran, 2012. "How Does Child Labor Affect the Demand for Adult Labor? Evidence from Rural Mexico," Working Papers 016, University of Notre Dame, Department of Economics, revised Aug 2012.

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