How Effective Are Cash Transfer Programs in Mitigating Income Instability? Evidence from the AUH in Argentina

Income instability is a crucial determinant of household poverty, especially in developing countries where precarious employment is common and social protection tools are limited. This paper assesses the effectiveness of Argentina's Universal Child Allowance (AUH) cash transfer program in buffering income instability among economically vulnerable households in Argentina. Using nationally representative household surveys from 2004 to 2015, we apply a Matching Difference-in-Difference approach to compare income stability between AUH eligible and non-eligible households. Results show that the AUH effectively reduces income instability among eligible households, lowering both the proportion of periods spent in poverty by 17% and income fluctuations by 5% to 17% relative to a situation without the program introduction. This stabilising effect is stronger among households experiencing income losses during the period, indicating the program's role in smoothing negative income shocks. While the overall impact is higher for households with young children, its capacity to prevent poverty transitions is weaker among households that are less resilient to shocks, such as single mothers. Finally, analysis of the underlying mechanisms suggests that the non-labour income channel mainly explains income volatility reduction, with the AUH substituting informal risk-coping strategies. The labour income and supply channel appears limited.