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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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Related research

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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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. 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
  2. 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
  3. Identifying the dynamic protective effects of social programs
    by Jed Friedman in Development Impact on 2012-07-11 13:15:25
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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Cited by:
  1. Coady, David & Martinelli, Cesar & Parker, Susan W., 2013. "Information and participation in social programs," Policy Research Working Paper Series 6319, The World Bank.
  2. Solomon Asfaw & Silvio Daidone & Benjamin Davis & Josh Dewbre & Alessandro Romeo & Paul Winters & Katia Covarrubias & Habiba Djebbari, 2012. "Analytical Framework for Evaluating the Productive Impact of Cash Transfer Programmes on Household Behaviour ? Methodological Guidelines for the From Protection to Production Project," Working Papers 101, International Policy Centre for Inclusive Growth.
  3. Haagh, Louise, 2011. "Working Life, Well-Being and Welfare Reform: Motivation and Institutions Revisited," World Development, Elsevier, vol. 39(3), pages 450-473, March.
  4. Macours, Karen & Premand, Patrick & Vakis, Renos, 2012. "Transfers, Diversification and Household Risk Strategies: Experimental evidence with lessons for climate change adaptation," CEPR Discussion Papers 8940, C.E.P.R. Discussion Papers.
  5. Patrick Carter, 2012. "Aid Allocation Rules," Bristol Economics Discussion Papers 12/630, Department of Economics, University of Bristol, UK.
  6. John Maluccio, 2010. "The Impact of Conditional Cash Transfers on Consumption and Investment in Nicaragua," The Journal of Development Studies, Taylor and Francis Journals, vol. 46(1), pages 14-38.
  7. 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.
  8. Patrinos, Harry Anthony & Skoufias, Emmanuel & Lunde, Trine, 2007. "Indigenous peoples in Latin America : economic opportunities and social networks," Policy Research Working Paper Series 4227, The World Bank.
  9. Almeida, Rita & Galasso, Emanuela, 2007. "Jump-starting self-employment ? Evidence among welfare participants in Argentina," Policy Research Working Paper Series 4270, The World Bank.

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