Working Paper: NBER ID: w22670
Authors: 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.
Keywords: cash transfers; poverty; human capital; Ecuador
JEL Codes: I3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Cash transfers received in early childhood (J13) | Learning outcomes in late childhood (G53) |
| Cash transfers received during late childhood (J13) | Likelihood of young women completing secondary school (I24) |
| Cash transfers received during late childhood (J13) | Enrollment in tertiary education (I23) |
| Cash transfers received during late childhood (J13) | Employment outcomes (J68) |
| Cash transfers received in early childhood (J13) | Test scores (language, math, and other) (C89) |
| Cash transfers received during late childhood (J13) | Prevention of dropouts (I21) |
| Cash transfers received during late childhood (J13) | Breaking the cycle of intergenerational poverty (I24) |