Investing cash transfers to raise long term living standards
AbstractThe 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 InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 3994.
Date of creation: 01 Aug 2006
Date of revision:
Economic Theory&Research; Small Area Estimation Poverty Mapping; Municipal Housing and Land; Land and Real Estate Development; Real Estate Development;
Other versions of this item:
- Paul J. Gertler & Sebastian W. Martinez & Marta Rubio-Codina, 2012. "Investing Cash Transfers to Raise Long-Term Living Standards," American Economic Journal: Applied Economics, American Economic Association, vol. 4(1), pages 164-92, January.
- D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
- O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
This paper has been announced in the following NEP Reports:
- NEP-AGR-2006-08-19 (Agricultural Economics)
- NEP-ALL-2006-08-19 (All new papers)
- NEP-DEV-2006-08-19 (Development)
- NEP-MFD-2006-08-19 (Microfinance)
- NEP-URE-2006-08-19 (Urban & Real Estate Economics)
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