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Conditional Transfers, Labor Supply, and Poverty: Microsimulating Oportunidades


  • Samuel Freije


  • Rosangela Bando


  • Fernanda Arce


This article summarizes a microsimulation exercise for the Mexican human development program Oportunidades and presents a series of simulations of its actual and potential impact upon poverty at the national, urban and rural levels. The microsimulation tool used for this paper makes accounting and behavioral exercises and aims to answer three main questions: What would have happened to poverty if the program had been cancelled, if benefits were doubled, or if urban beneficiaries were doubled? We conclude that Oportunidades can be associated with up to a third of the reduction in rural poverty in Mexico by the year 2002. Doubling benefits and targeting urban beneficiaries would reduce poverty a further 30 percent from its 2002 level. We also find that each percentage point of poverty reduction at the rural level costs around 326 million pesos per month in cash transfers (that is, 1.2 percent of the central government´s total spending in 2002). Further reductions of poverty would have higher or lower average costs depending on the area and on whether they are performed either by extensions in coverage or by enlargement of benefits. Finally, behavioral simulations suggest that labor supply does not seem to be much affected by current cash transfers from Oportunidades.

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  • Samuel Freije & Rosangela Bando & Fernanda Arce, 2006. "Conditional Transfers, Labor Supply, and Poverty: Microsimulating Oportunidades," ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, vol. 0(Fall 2006), pages 73-124, August.
  • Handle: RePEc:col:000425:008646

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    References listed on IDEAS

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    Cited by:

    1. Fabio Veras Soares & Sergei Suarez Dillon Soares & Marcelo Medeiros & Rafael Guerreiro Osório, 2006. "Cash Transfer Programmes in Brazil: Impacts on Inequality and Poverty," Working Papers 21, International Policy Centre for Inclusive Growth.
    2. Barrientos, Armando, 2012. "Social Transfers and Growth: What Do We Know? What Do We Need to Find Out?," World Development, Elsevier, vol. 40(1), pages 11-20.
    3. Nikita Céspedes, 2014. "General Equilibrium Analysis of Conditional Cash Transfers," Working Papers 2014-25, Peruvian Economic Association.
    4. Armando Barrientos & Juan Miguel Villa, 2013. "Antipoverty transfers and labour force participation effects," Brooks World Poverty Institute Working Paper Series 18513, BWPI, The University of Manchester.
    5. Ramírez, Nerys F., 2016. "Determinantes del Desempleo en la República Dominicana: Dinámica Temporal y Microsimulaciones
      [Determinants of Unemployment in the Dominican Republic: Temporal Dynamics and Microsimulations]
      ," MPRA Paper 76998, University Library of Munich, Germany.
    6. Miguel Nino-Zarazua, 2011. "Mexico’s Progresa-Oportunidades and the emergence of Social Assistance in Latin America," Brooks World Poverty Institute Working Paper Series 14211, BWPI, The University of Manchester.
    7. Douglas McKee & Petra E. Todd, 2011. "The longer-term effects of human capital enrichment programs on poverty and inequality : Oportunidades in Mexico," Estudios de Economia, University of Chile, Department of Economics, vol. 38(1 Year 20), pages 67-100, June.
    8. Rafael Novella & Laura Ripani & Guillermo Cruces & Maria Laura Alzuá, 2012. "Conditional Cash Transfers, Female Bargaining Power and Parental Labour Supply," IDB Publications (Working Papers) 78223, Inter-American Development Bank.
    9. Barrientos, Armando & Niño-Zarazúa, Miguel, 2011. "Social transfers and chronic poverty: objectives, design, reach and impact," MPRA Paper 30465, University Library of Munich, Germany.
    10. Margaret Grosh & Carlo del Ninno & Emil Tesliuc & Azedine Ouerghi, 2008. "For Protection and Promotion : The Design and Implementation of Effective Safety Nets," World Bank Publications, The World Bank, number 6582.

    More about this item


    microsimulation; oportunidades; reducing poverty; Mexico;

    JEL classification:

    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply


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