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Can Cash Transfers Help Households Escape an Inter-Generational Poverty Trap?

Author

Listed:
  • Maria Caridad Araujo
  • Mariano Bosch

    (Inter American Development Bank)

  • Norbert Schady

    (Inter-American Development Bank)

Abstract

Many poor households in developing countries are liquidity-constrained. As a result, they may under-invest in the human capital of their children. We provide new evidence on the long-term (10-year) effects of cash transfers using data from Ecuador. Our analysis is based on two separate sources of data and two identification strategies. First, we extend the results from an experiment that randomly assigned children under the age of 6 years to “early†or “late†treatment groups. Although the early treatment group received twice as much in total transfers, we find no difference between children in the two groups on performance on a large number of tests. Second, we use a regression discontinuity design exploiting the fact that a “poverty index†was used to determine eligibility for transfers. We focus on children who were just-eligible and just-ineligible for transfers when they were in late childhood, and compare their school attainment and work status 10 years later. Transfers increased secondary school completion, but the effects are small, between 1 and 2 percentage points from a counterfactual school completion rate of 75 percent. We conclude that any effect of cash transfers on the inter-generational transmission of poverty in Ecuador is likely to be modest.

Suggested Citation

  • Maria Caridad Araujo & Mariano Bosch & Norbert Schady, 2016. "Can Cash Transfers Help Households Escape an Inter-Generational Poverty Trap?," Working Papers 2016-030, Human Capital and Economic Opportunity Working Group.
  • Handle: RePEc:hka:wpaper:2016-030
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    More about this item

    Keywords

    poverty; human capital; liquidity constraints; educational attainment;
    All these keywords.

    JEL classification:

    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • I00 - Health, Education, and Welfare - - General - - - General

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