Conditional Cash Transfers and the Equity-Efficiency Debate

29 Pages Posted: 20 Apr 2016

See all articles by Jishnu Das

Jishnu Das

Georgetown University; Georgetown University

Quy-Toan Do

World Bank - Development Research Group (DECRG)

Berk Ozler

World Bank - Development Economics Research Group (DECRG)

Date Written: April 21, 2004

Abstract

During the past decade, the use of conditional cash transfers to increase investment in human capital has generated considerable excitement in both research and policy forums. Such schemes are being increasingly adopted in a number of contexts and countries to improve outcomes in health, education, and child labor as they aim to balance the goals of current and future poverty reduction. In this paper, Das, Do, and Ozler define any scheme requiring a specified course of action in order to receive a benefit as a conditional cash transfer. This definition includes cash transfers based on human capital investments, but is sufficiently broad to encompass other schemes such as work-fare programs or consumption transfers.

The authors examine the rationales behind, the problems with, and the tradeoffs inherent to conditional cash transfer programs. They discuss two main concerns: low participation and fungibility. Low participation refers to the problem of program uptake. If individuals do not participate in the program, whether it was designed to increase human capital investment or to target resources, the program will not be successful. The problem of fungibility, however, depends on the rationale for the particular conditional cash transfer program. When used to increase efficiency, even when program uptake is high, program effects may be less than envisioned due to behavioral responses of households that lead to changes in the consumption of close substitutes. While researchers have typically addressed these issues separately, the authors emphasize the need for policymakers to incorporate a number of different factors in a comprehensive framework to design optimal conditional cash transfer schemes.

This paper - a product of the Poverty Team, Development Research Group - is part of a larger effort in the group to understand the rationale underlying some social programs.

Suggested Citation

Das, Jishnu and Do, Quy Toan and Ozler, Berk, Conditional Cash Transfers and the Equity-Efficiency Debate (April 21, 2004). World Bank Policy Research Working Paper No. 3280. Available at SSRN: https://ssrn.com/abstract=610325

Jishnu Das (Contact Author)

Georgetown University ( email )

O Street
Washington, DC 20057
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Georgetown University ( email )

Old North, Suite 100
37th & O Streets NW
Washington, DC 20057
United States

Quy Toan Do

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

Berk Ozler

World Bank - Development Economics Research Group (DECRG) ( email )

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

HOME PAGE: http://econ.worldbank.org/staff/bozler

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