Cash and Cognition: The Impact of Transfer Timing on Standardized Test Performance and Human Capital

This paper shows that the timing of monetary transfers to low-income families affects students' cognitive performance on high-stakes standardized tests. We combine administrative records from the world's largest conditional cash transfer program with college admission exam results of 185,000 high school students from beneficiary families. Exploiting random variation in payment dates, we find that receiving the transfer in the days preceding the exam increases test scores by 0.01 standard deviations relative to receiving it the subsequent week. Question-level analysis reveals that effects are concentrated in final questions and easier questions, suggesting improved cognitive endurance and effort allocation. The impacts are largest for recipients of larger transfers, who experience persistent gains in human capital accumulation: their college enrollment increases by 0.6 percentage points, with higher graduation and formal employment rates seven years later. Our findings show that short-term liquidity constraints during high-stakes events can have long-lasting implications, and suggest opportunities to improve social programs through improved payment scheduling.