Can Cash Transfers Help Households Escape an Inter-Generational Poverty Trap?

31 Pages Posted: 26 Sep 2016

See all articles by Maria Caridad Araujo

Maria Caridad Araujo

Inter-American Development Bank (IDB)

Mariano Bosch Mossi

World Bank

Norbert Schady

Inter-American Development Bank (IDB)

Date Written: September 2016

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.

Suggested Citation

Araujo, Maria Caridad and Bosch Mossi, Mariano and Schady, Norbert, Can Cash Transfers Help Households Escape an Inter-Generational Poverty Trap? (September 2016). NBER Working Paper No. w22670. Available at SSRN: https://ssrn.com/abstract=2843383

Maria Caridad Araujo (Contact Author)

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

Mariano Bosch Mossi

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Norbert Schady

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

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