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

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  • M. Caridad Araujo
  • Mariano Bosch
  • Norbert Schady

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 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

  • M. Caridad Araujo & Mariano Bosch & Norbert Schady, 2016. "Can Cash Transfers Help Households Escape an Inter-Generational Poverty Trap?," NBER Working Papers 22670, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:22670
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    References listed on IDEAS

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    1. Can Cash Transfers Help Households Escape an Inter-Generational Poverty Trap?
      by maximorossi in NEP-LTV blog on 2016-10-06 00:00:07

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    1. repec:nbr:nberch:13951 is not listed on IDEAS
    2. Elizabeth Tilley & Isabel Günther, 2016. "The Impact of Conditional Cash Transfer on Toilet Use in eThekwini, South Africa," Sustainability, MDPI, Open Access Journal, vol. 8(10), pages 1-16, October.
    3. Paredes-Torres, Tatiana, 2017. "The impact of exposure to cash transfers on education and labor market outcomes," MPRA Paper 79008, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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