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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
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)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Skoufias, Emmanuel & Davis, Benjamin & de la Vega, Sergio, 2001. "Targeting the Poor in Mexico: An Evaluation of the Selection of Households into PROGRESA," World Development, Elsevier, vol. 29(10), pages 1769-1784, October.
- Skoufias, Emmanuel, 2005. "PROGRESA and its impacts on the welfare of rural households in Mexico:," Research reports 139, International Food Policy Research Institute (IFPRI).
- Carroll, Christopher D & Kimball, Miles S, 1996.
"On the Concavity of the Consumption Function,"
Econometric Society, vol. 64(4), pages 981-92, July.
- Christopher D. Carroll & Miles S. Kimball, 1995. "On the Concavity of the Consumption Function," Macroeconomics 9503003, EconWPA.
- Christopher D. Carroll & Miles S. Kimball, 1995. "On the concavity of the consumption function," Finance and Economics Discussion Series 95-10, Board of Governors of the Federal Reserve System (U.S.).
- Lloyd-Ellis, Huw & Bernhardt, Dan, 2000.
"Enterprise, Inequality and Economic Development,"
Review of Economic Studies,
Wiley Blackwell, vol. 67(1), pages 147-68, January.
- Moffitt, Robert, 1992. "Incentive Effects of the U.S. Welfare System: A Review," Journal of Economic Literature, American Economic Association, vol. 30(1), pages 1-61, March.
- Hoddinott, John & Skoufias, Emmanual, 2003.
"The impact of Progresa on food consumption,"
150, International Food Policy Research Institute (IFPRI).
- Paul Schultz, T., 2004. "School subsidies for the poor: evaluating the Mexican Progresa poverty program," Journal of Development Economics, Elsevier, vol. 74(1), pages 199-250, June.
- Woodruff, Christopher & Zenteno, Rene, 2007. "Migration networks and microenterprises in Mexico," Journal of Development Economics, Elsevier, vol. 82(2), pages 509-528, March.
- Angelucci, Manuela & Attanasio, Orazio, 2009.
"Oportunidades: Program Effect on Consumption, Low Participation, and Methodological Issues,"
IZA Discussion Papers
4475, Institute for the Study of Labor (IZA).
- Manuela Angelucci & Orazio Attanasio, 2009. "Oportunidades: Program Effect on Consumption, Low Participation, and Methodological Issues," Economic Development and Cultural Change, University of Chicago Press, vol. 57(3), pages 479-506, 04.
- Aghion, Philippe & Bolton, Patrick, 1997. "A Theory of Trickle-Down Growth and Development," Review of Economic Studies, Wiley Blackwell, vol. 64(2), pages 151-72, April.
- McKenzie, David J & Woodruff, Christopher, 2006.
"Do Entry Costs Provide an Empirical Basis for Poverty Traps? Evidence from Mexican Microenterprises,"
Economic Development and Cultural Change,
University of Chicago Press, vol. 55(1), pages 3-42, October.
- David J. McKenzie & Christopher Woodruff, 2006. "Do Entry Costs Provide an Empirical Basis for Poverty Traps? Evidence from Mexican Microenterprises," Economic Development and Cultural Change, University of Chicago Press, vol. 55, pages 3-42.
- Musgrove, Philip, 1979. "Permanent Household Income and Consumption in Urban South America," American Economic Review, American Economic Association, vol. 69(3), pages 355-68, June.
- Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters, in: A Theory of the Consumption Function, pages 1-6 National Bureau of Economic Research, Inc.
- Manuela Angelucci & Giacomo De Giorgi, 2009. "Indirect Effects of an Aid Program: How Do Cash Transfers Affect Ineligibles' Consumption?," American Economic Review, American Economic Association, vol. 99(1), pages 486-508, March.
- Ravallion, Martin & Chen, Shaohua, 2005. "Hidden impact? Household saving in response to a poor-area development project," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2183-2204, December.
- Wolpin, Kenneth I, 1982. "A New Test of the Permanent Income Hypothesis: The Impact of Weather on the Income and Consumption of Farm Households in India," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 23(3), pages 583-94, October.
- Lindh, Thomas & Ohlsson, Henry, 1998. "Self-Employment and Wealth Inequality," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 44(1), pages 25-42, March.
- Bhalla, Surjit S, 1979. "Measurement Errors and the Permanent Income Hypothesis: Evidence from Rural India," American Economic Review, American Economic Association, vol. 69(3), pages 295-307, June.
- Orazio Attanasio & Alice Mesnard, 2006. "The Impact of a Conditional Cash Transfer Programme on Consumption in Colombia," Fiscal Studies, Institute for Fiscal Studies, vol. 27(4), pages 421-442, December.
- Abhijit V. Banerjee & Andrew F. Newman, 1990.
"Occupational Choice and the Process of Development,"
911, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Banerjee, Abhijit V & Newman, Andrew F, 1993. "Occupational Choice and the Process of Development," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 274-98, April.
- Dean Yang, 2006.
"International Migration, Remittances, and Household Investment: Evidence from Philippine Migrants' Exchange Rate Shocks,"
NBER Working Papers
12325, National Bureau of Economic Research, Inc.
- Dean Yang, 2008. "International Migration, Remittances and Household Investment: Evidence from Philippine Migrants' Exchange Rate Shocks," Economic Journal, Royal Economic Society, vol. 118(528), pages 591-630, 04.
- Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-87, December.
- Paxson, Christina H, 1992. "Using Weather Variability to Estimate the Response of Savings to Transitory Income in Thailand," American Economic Review, American Economic Association, vol. 82(1), pages 15-33, March.
- Albarran, Pedro & Attanasio, Orazio P., 2002. "Do Public Transfers Crowd Out Private Transfers? Evidence from a Randomized Experiment in Mexico," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
- Sadoulet, Elisabeth & Janvry, Alain de & Davis, Benjamin, 2001. "Cash Transfer Programs with Income Multipliers: PROCAMPO in Mexico," World Development, Elsevier, vol. 29(6), pages 1043-1056, June.
- Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1, October.
- Skoufias, Emmanuel & Parker, Susan W., 2001.
"Conditional cash transfers and their impact on child work and schooling,"
123, International Food Policy Research Institute (IFPRI).
- Skoufias, Emmanuel & Parker, Susan W., 2001. "Conditional cash transfers and their impact on child work and schooling," FCND discussion papers 123, International Food Policy Research Institute (IFPRI).
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Identifying the dynamic protective effects of social programs
by Jed Friedman in Development Impact on 2012-07-11 13:15:25
- Development that Works: CCTs: not the silver bullet, but with long lasting positive effects
by Pablo IbarrarÃ¡n in Eval Central on 2013-04-24 10:55:46
- 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
- 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.
- Debowicz, Darío & Golan, Jennifer, 2014. "The impact of Oportunidades on human capital and income distribution in Mexico: A top-down/bottom-up approach," Journal of Policy Modeling, Elsevier, vol. 36(1), pages 24-42.
- repec:asi:ijoass:2013:p:2236-2245 is not listed on IDEAS
- 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.
- Macours, Karen & Premand, Patrick & Vakis, Renos, 2012. "Transfers, diversification and household risk strategies : experimental evidence with lessons for climate change adaptation," Policy Research Working Paper Series 6053, The World Bank.
- David Coady & César Martinelli & Susan W. Parker, 2013.
"Information and Participation in Social Programs,"
World Bank Economic Review,
World Bank Group, vol. 27(1), pages 149-170.
- Haagh, Louise, 2011. "Working Life, Well-Being and Welfare Reform: Motivation and Institutions Revisited," World Development, Elsevier, vol. 39(3), pages 450-473, March.
- 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.
- Fitz, Dylan, 2013. "Development Chutes and Ladders: A Joint Impact Evaluation of Asset and Cash Transfers in Brazil," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150254, Agricultural and Applied Economics Association.
- Angelucci, Manuela, 2013. "Migration and Financial Constraints: Evidence from Mexico," IZA Discussion Papers 7726, Institute for the Study of Labor (IZA).
- Almeida, Rita & Galasso, Emanuela, 2007.
"Jump-starting self-employment ? Evidence among welfare participants in Argentina,"
Policy Research Working Paper Series
4270, The World Bank.
- Almeida, Rita K. & Galasso, Emanuela, 2007. "Jump-Starting Self-Employment? Evidence among Welfare Participants in Argentina," IZA Discussion Papers 2902, Institute for the Study of Labor (IZA).
- John A. Maluccio, 2007.
"The Impact of Conditional Cash Transfers on Consumption and Investment in Nicaragua,"
Middlebury College Working Paper Series
0722, Middlebury College, Department of Economics.
- John Maluccio, 2010. "The Impact of Conditional Cash Transfers on Consumption and Investment in Nicaragua," Journal of Development Studies, Taylor & Francis Journals, vol. 46(1), pages 14-38.
- de Hoop, Jacobus & Rosati, Furio C., 2013. "Cash Transfers and Child Labour," IZA Discussion Papers 7496, Institute for the Study of Labor (IZA).
- World Bank, 2006. "Making the New Indonesia Work for the Poor," World Bank Other Operational Studies 8172, The World Bank.
- Patrick Carter, 2012. "Aid Allocation Rules," Bristol Economics Discussion Papers 12/630, Department of Economics, University of Bristol, UK.
- Alderman, Harold & Yemtsov, Ruslan, 2013. "How can safety nets contribute to economic growth ?," Policy Research Working Paper Series 6437, The World Bank.
- Orazio Attanasio & ValÃ©rie Lechene, 2013. "Efficient responses to targeted cash transfers," IFS Working Papers W13/28, Institute for Fiscal Studies.
- 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, January.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.