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Conditional Cash Transfers and Education Quality in the Presence of Credit Constraints

Author

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  • Elena Del Rey

    (University of Girona, Campus de Montilivi, 17071 Girona, Spain)

  • Fernanda Estevan

    (Department of Economics, University of Ottawa, Ottawa, ON)

Abstract

We investigate the relative merits of unconditional cash transfers (UCT), conditional cash transfers (CCT), and improvements in education quality on efficiency and welfare. In our setting some parents under-invest in their children's education because capital market imperfections prevent them from borrowing. When credit constrained households can be perfectly targeted by the government, we show that CCT are more effective than UCT in enhancing efficiency and equivalent in terms of welfare. When public education quality is very low, raising quality is welfare improving, but is never efficiency enhancing. If the government cannot target constrained households, UCT may be the best policy both in terms of efficiency and welfare.

Suggested Citation

  • Elena Del Rey & Fernanda Estevan, 2011. "Conditional Cash Transfers and Education Quality in the Presence of Credit Constraints," Working Papers 1108E, University of Ottawa, Department of Economics.
  • Handle: RePEc:ott:wpaper:1108e
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    Cited by:

    1. Kitaura, Koji & Miyazawa, Kazutoshi, 2021. "Inequality and conditionality in cash transfers: Demographic transition and economic development," Economic Modelling, Elsevier, vol. 94(C), pages 276-287.
    2. Del Rey, Elena & Estevan, Fernanda, 2013. "Conditional cash transfers and education quality in the presence of credit constraints," Economics of Education Review, Elsevier, vol. 34(C), pages 76-84.

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    More about this item

    Keywords

    conditional cash transfers; public education; education quality; unconditional cash transfers; credit constraint; efficiency; welfare;
    All these keywords.

    JEL classification:

    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education

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