Publication: Conditionality as Targeting?: Participation and Distributional Effects of Conditional Cash Transfers
Date
2017-01
ISSN
Published
2017-01
Author(s)
Abstract
Conditional cash transfer programs,
whereby transfers to households are conditional on school
attendance or health checkups, have become a widespread
policy tool. They are viewed as a means of immediate poverty
alleviation through the cash payments, and as a foundation
of long-term poverty reduction through the emphasis on human
capital formation. Because targeted transfers are usually
conditioned on the consumption of normal goods, richer
eligible households are more likely to consume more
educational and health care opportunities than poorer ones.
Thus, the eligible poorest households may benefit least from
conditional cash transfers even to the extent that they may
not participate at all. If conditionality is conceptualized
as a cost at the margin, it may be leading poor households
to opt out. This paper proposes a framework to model
household decision making on participation (or not) in cash
transfer programs depending on whether a conditionality
exists. The paper outlines the optimal size of the cash
transfer such that a fixed government budget maximizes the
poverty reduction. The paper also shows that unconditional
cash transfers may be preferable over conditional cash
transfers if a government has a sufficiently high degree of
poverty aversion, that is, if, beyond the poverty headcount,
the government cares about how poor the poor are or the
distance of the poorest among the poor below the poverty
line. This basic argument carries over from income poverty
to education poverty. The framework can be useful in shaping
the recent discussion on the merits of universal benefits
over conditional transfers in reducing poverty.
Citation
“Rodriguez-Castelan, Carlos. 2017. Conditionality as Targeting?; Conditionality as Targeting? Participation and Distributional Effects of Conditional Cash Transfers : Participation and Distributional Effects of Conditional Cash Transfers. Policy Research working paper,no. WPS 7940;; Policy Research Working Paper;No. 7940. © World Bank, Washington, DC. http://openknowledge.worldbank.org/handle/10986/25949 License: CC BY 3.0 IGO.”
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