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Investing Cash Transfers to Raise Long-Term Living Standards

Author Info

  • Paul J. Gertler
  • Sebastian W. Martinez
  • Marta Rubio-Codina

Abstract

Using data from a randomized experiment, we find that poor rural Mexican households invested part of their cash transfers from the Oportunidades program in productive assets, increasing agricultural income by almost 10 percent after 18 months of benefits. We estimate that for each peso transferred, households consume 74 cents and invest the rest, permanently increasing long-term consumption by about 1.6 cents. Results suggest that cash transfers can achieve long-term increases in consumption through investment in productive activities, thereby permitting beneficiary households to attain higher living standards that are sustained even after transitioning off the program. (JEL D14, H23, I38, O12)

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Article provided by American Economic Association in its journal American Economic Journal: Applied Economics.

Volume (Year): 4 (2012)
Issue (Month): 1 (January)
Pages: 164-92

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Handle: RePEc:aea:aejapp:v:4:y:2012:i:1:p:164-92
Note: DOI: 10.1257/app.4.1.164
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Find related papers by JEL classification:
  • 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, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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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
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    by Pablo Ibarrarán in Hacia el desarrollo efectivo on 2013-04-24 10:53:51
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