The Coffee Crisis, Early Childhood Development, and Conditional Cash Transfers

Abstract

This paper examines the efficacy of three conditional cash transfer (CCT) programs in Honduras, Mexico, and Nicaragua in mitigating the potential negative effects of an income shock caused by falling prices of coffee, an important cash crop to many CCT participants. A theoretical household model is developed that demonstrates both the positive potential of CCTs to mitigate negative shocks effects on early childhood development and the negative potential of CCTs to exacerbate the impacts of a negative shock to early childhood development if the conditionality encourages households to shift resources from younger to older children to sustain their school attendance.