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Is there any evidence that the “Conditional” in Conditional Cash

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Is there any evidence that the “Conditional” in Conditional Cash Powered By Docstoc
					Does the “Conditional” in Conditional Cash
Transfer design improve program ability to
    reduce inter-generational poverty?




               Rachel Cassidy
          Friday 12th February, 2010
                        Rachel Cassidy, MSc Economics for Development




Outline
   CCTs: a brief background
   Conditionality: the theory
    • Advantages
    • Disadvantages
   Conditionality: the empirics
    • Mexico‟s PROGRESA/Oportunidades
    • De Brauw and Hoddinott (2008)
                                         Rachel Cassidy, MSc Economics for Development


   CCTs: where it’s ATT
            Opportunity NYC

 PROGRESA         PATH                                          Cash For Education
Eduque a la nina Red de Oportunidades

 Familias en Acción
   Bono de Desarollo Humano
                                                           HIV/AIDS Scheme
                         Bolsa Escola/Familia

                       Jefes y Jefas de Hogares

     Chile Solidario
                          Rachel Cassidy, MSc Economics for Development




CCTs: an overview
   Cash transfer schemes; targeted at the poor;
    payment tied to compliance with
    health/education conditions.
   => Break intergenerational poverty
    transmission by encouraging human capital
    investment.
   “As close as you can come to a magic bullet in
    development.” Nancy Birdsall, president of the
    Centre for Global Development.
                                  Rachel Cassidy, MSc Economics for Development


Why make transfers CONDITIONAL?
Some economic theory…

 •   Conditionality creates a PRICE EFFECT:
      • Brings marginal private benefit of health/education
          closer to marginal social benefit (by increasing benefit,
          or by reducing opportunity cost; whichever way you look
          at it!).
      •   Pre-intervention MSB > MPB, because of POSITIVE
          EXTERNALITIES to human capital formation.
 •   Transfer WITHOUT conditionality…
     => INCOME EFFECT only,
     => Increases in health/education very small.
                                Rachel Cassidy, MSc Economics for Development

More economic justifications for
conditionality
   Why else might private decisions be
    suboptimal?
    •   Poor households have imperfect information on the
        benefits of schooling/health.
    •   High discount rate/credit constraints => earnings from
        child labour NOW more important than potentially
        higher lifetime earnings.
    •   Discrimination against girls?
    •   Household decision-making: bargaining position of
        mothers is weak?
                           Rachel Cassidy, MSc Economics for Development




And what about the politics?
   Reducing the stigma: a “contract”, not a
    handout.
   Social transfer systems receive more
    support if tied (as demonstrated by the
    widespread acclaim for CCT‟s).
    • Tangible targets for judging policy success.
    • “We know what‟s best for the poor”?..
                              Rachel Cassidy, MSc Economics for Development




Drawbacks of conditionality
   Demeaning to the poor?
   Imposes costs on recipients…
     • Some can‟t meet the requirements.
     • “Morally atrocious”-social protection is a UN-
        declared human right that cannot be denied-
        Freelander (2007).
   If conditions don‟t align with poor‟s preferences, act
    as welfare-reducing constraints.
   Admin Costs: 2% of PROGRESA‟s annual budget…
     • 2% of $2.2bn = mucho dinero
                    Rachel Cassidy, MSc Economics for Development

So how big are the benefits?
Some empirical evidence…
   Case study: Mexico‟s PROGRESA
   An economist‟s dream…
                                        A
                                   RANDOMIZED
                                   CONTROLLED
                                     TRIAL!!!
                                   Rachel Cassidy, MSc Economics for Development




De Brauw and Hoddinott (2008)
   PROGRESA‟s transfers had 3 components:
    •   Cash for food (the alimento); cash for school supplies; and
        cash conditional on attendance (the beca).

   Conditions for the beca: school attendance of >= 85%.
    Prove this with an E1 form, signed by the teacher.

   However, A SIGNIFICANT NUMBER OF HOUSEHOLDS
    (around 10%) NEVER RECEIVED THE FORM, YET
    STILL RECEIVED TRANSFERS.
    •   No way of monitoring the child without the form, so these
        transfers UNCONDITIONAL.
                                   Rachel Cassidy, MSc Economics for Development

A way to test the impact of
conditionality…
   Confine sample to those who received the beca (with or
    without the E1 form).
   Regress enrolment on „treatment‟ (==1 if received the
    form; ==0 if not) and calculate ATT etc for conditionality.
   But what if households THOUGHT they were being
    monitored, even without the form?
   A more sophisticated test:
    •   Using survey data, identify two groups: group A if received
        form AND UNDERSTOOD conditionality on schooling;
        group B if didn‟t receive form AND DIDN‟T understand
        conditions.
    •   Group A definitely „treated‟ with conditionality. Group B
        definitely not.
                                    Rachel Cassidy, MSc Economics for Development




The Econometrics

    Ensuring unconfoundedness:
    lots of x variables (child, household, and
     community characteristics).
    Probit model
     •   p(enrolled) if treatment== 1 vs. 0
   What if treatment still not fully random?
     •   Nearest-neighbour matching.
     •   Results almost identical to ordinary probit model.
                           Rachel Cassidy, MSc Economics for Development




Results
   ATT positive and significant:
    • Conditionality increases probability of
      enrolment.


   BUT, disaggregating by grade =>
    treatment effect insignificant; except for
    grades 6, 7 and 8.
                Rachel Cassidy, MSc Economics for Development




Results (continued)
                Rachel Cassidy, MSc Economics for Development




Results (continued)
                        Rachel Cassidy, MSc Economics for Development




Conclusion
   Little benefit of conditioning transfers
    based on enrolment in primary school.
   Large benefit of conditioning transfers at
    entry into lower secondary school.
   => Considerable efficiency gains
    possible if CCTs calibrated more
    carefully.
                          Rachel Cassidy, MSc Economics for Development




Bibliography
   De Brauw and Hoddinott, Must conditional
    cash transfer programs be conditioned to be
    effective?, IFPRI (2008).
   De Janvry et al, Journal of Development
    Economics (2006).
   De Janvry and Sadoulet, Conditional Cash
    Transfer Programs: are they rally magic
    bullets?, GFAE (2004).

				
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