CONDITIONAL CASH TRANSFER PROGRAMS

1. CONDITIONAL CASH TRANSFER PROGRAMS John Hoddinott IFPRI

2. Introduction • Conditional Cash Transfer (CCT) programs are now found in more than 20 developing countries. • They are perceived as being “close to a magic bullet” for development. Are they? This presentation discusses four topics: • How they work • Evidence of impact • Major debates in implementation • Are they for all countries?

3. How do CCT programs work? • CCT programs have the following characteristics. • They are targeted to poor households • Cash transfers are usually paid to mothers. • Cash transfers may be made as a lump-sum or may vary depending on the number, age and sex of children • Recipients commit to undertaking certain actions, such as enrolling children in school or attending pre- and postnatal health care appointments • Some programs require women to attend regular health and nutrition training workshops. • Some provide resources that improve the supply and quality of the schools and health care facilities used by beneficiaries.

4. How do CCT programs work? CCT programs aim to reduce current poverty while improving human capital formation and, thus reduce the intergenerational transmission of poverty.

5. Do CCTs work? • In Mexico, PROGRESA reduced: • Poverty by 8.2%, the poverty gap by 23.6%, and the severity of poverty by 34.5%. • In Nicaragua, the Red de Protección Social increased: • Average per capita expenditures by 18% and • Average per capita expenditures of the poorest households by 30%

6. Do CCTs work?Impact on school enrollment

7. Other examples of impact • In Mexico, health visits increased by 18 percent in PROGRESA localities, and illnesses among children 0–5 years old were reduced by 12 percent. • Young children in Honduras increased their use of health services by 15–21 percentage points • Stunting was reduced in Nicaragua by 5.5 points, and in Colombia by 7 points. • In both Mexico and Nicaragua, calorie intake increased, as did the consumption of fruits, vegetables, meat, and dairy products.

8. Major debates in implementation • Are they too expensive? • Are they sufficient as an anti-poverty strategy? • Is conditioning necessary? • How should graduation be designed?

9. Is conditionality necessary? • Are conditional cash transfers better than unconditional transfers for achieving objectives? • Conceptually, the debate runs along the following lines: • “Yes”, conditionality is justified on economic grounds (eg providing necessary incentive to keep girls in school; reduces stigma effects; political economy reasons) • “No”, conditionality is costly; it may lead to exclusion of those who most need these transfers; social protection is a human right to which conditions should not be applied

10. Is conditionality necessary? • There is very limited evidence on the impact of conditionality. In Mexico: • Conditionality increased enrollment in the first grade of lower secondary school by approximately 20 percentage points • Monitoring conditionality represented approximately 2 percent of total program costs. • This is an area where further research (eg via experimental designs) would be very valuable

11. Graduation • Once enrolled in a program, should participants receive benefits forever? How should households “graduate” from programs. • The simplest approach is to just let households “age-out” of the program, but this could mean that they remain in the program for decades • An alternative is to require household eligibility to be re-assessed after a certain period of participation. But how frequently? • More frequently reduces “error of inclusions” BUT introduces uncertainty for households in terms of benefits and may create perverse incentives • Less frequently increases “errors of inclusion” and thus may increase program costs and possibly lead to exclusion of other deserving households

12. CCTs: Always and everywhere? • While CCT programs have an impressive track record, not all have functioned as well as their designers had hoped. They are not for every country, and no two counties should necessarily adopt identical programs. • In assessing whether a CCT program is appropriate, four main issues come to the fore:

13. CCTs: Always and everywhere? • What are current levels of specific human capital outcomes? Do these differ by region? By sex? • Why are specific human capital outcomes too low? • Is there high-level political support for a CCT program? • What administrative resources are available?

14. Conclusion A magic bullet? No. A potentially powerful means of reducing poverty and increasing human capital formation? YES!