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Investing cash transfers to raise long term living standards

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  • Gertler, Paul
  • Martinez, Sebastian
  • Rubio-Codina, Marta

Abstract

The authors test whether poor households use cash transfers to invest in income generating activities that they otherwise would not have been able to do. Using data from a controlled randomized experiment, they find that transfers from the Oportunidades program to households in rural Mexico resulted in increased investment in micro-enterprise and agricultural activities. For each peso transferred, beneficiary households used 88 cents to purchase consumption goods and services, and invested the rest. The investments improved the household's ability to generate income with an estimated rate of return of 17.55 percent, suggesting that these households were both liquidity and credit constrained. By investing transfers to raise income, beneficiary households were able to increase their consumption by 34 percent after five and a half years in the program. The results suggest that cash transfers to the poor may raise long-term living standards, which are maintained after program benefits end.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3994.

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Date of creation: 01 Aug 2006
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Handle: RePEc:wbk:wbrwps:3994

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Keywords: Economic Theory&Research; Small Area Estimation Poverty Mapping; Municipal Housing and Land; Land and Real Estate Development; Real Estate Development;

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Identifying the dynamic protective effects of social programs
    by Jed Friedman in Development Impact on 2012-07-11 13:15:25
  2. Development that Works: CCTs: not the silver bullet, but with long lasting positive effects
    by Pablo Ibarrarán in Eval Central on 2013-04-24 10:55:46
  3. Transferencias condicionadas: no son varita mágica, pero hay efectos positivos de largo plazo
    by Pablo Ibarrarán in Hacia el desarrollo efectivo on 2013-04-24 10:53:51
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