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

Abstract

work is licensed under a Creative Commons IGO 3.0 AttributionNonCommercial-NoDerivatives (CC-IGO BY-NC-ND 3.0 IGO) license (http://creativecommons.org/licenses/by-nc-nd/3.0/igo/ legalcode) and may be reproduced with attribution to the IDB and for any non-commercial purpose, as provided below. No derivative work is allowed.Any dispute related to the use of the works of the IDB that cannot be settled amicably shall be submitted to arbitration pursuant to the UNCITRAL rules. The use of the IDB's name for any purpose other than for attribution, and the use of IDB's logo shall be subject to a separate written license agreement between the IDB and the user and is not authorized as part of this CC-IGO license.Following a peer review process, and with previous written consent by the Inter-American Development Bank (IDB), a revised version of this work may also be reproduced in any academic journal, including those indexed by the American Economic Association's EconLit, provided that the IDB is credited and that the author(s) receive no income from the publication. Therefore, the restriction to receive income from such publication shall only extend to the publication's author(s). With regard to such restriction, in case of any inconsistency between the Creative Commons IGO 3.0 Attribution-NonCommercial-NoDerivatives license and these statements, the latter shall prevail.Note that link provided above includes additional terms and conditions of the license.The opinions expressed in this publication are those of the authors and do not necessarily reflect the views of the Inter-American Development Bank, its Board of Directors, or the countries they represent. AbstractMany 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 total 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 intergenerational transmission of poverty in Ecuador is likely to be modest.JEL code: I38

Developing Hope among Impoverished Children

“…Indeed it may be holistic interventions such as child sponsorship that operate on multiple fronts – on the spiritual, psychological, and social development of young children – that are more likely to have longer-term effects than programs focused only on relieving purely economic constraints, such as cash transfers. For example, Araujo, Bosch and Schady (2016) find, using a discontinuity in income-eligibility, that the long-term effects of six years of cash transfers on secondary-school completion in Ecuador are actually quite small, between 1 and 2 percentage points from a counterfactual secondary-school completion rate of 75 percent. In contrast Wydick, Glewwe and Rutledge (2013) find, using an age-eligibility rule at the time of program rollout similar to that used in this paper, that the impact of the Compassion sponsorship program on secondary school completion was 12–18 percentage points higher over a baseline completion rate of 45 percent measured across six countries that include Bolivia and Guatemala in Latin America.…”

El gasto social y la pobreza multidimensional en Ecuador

“…Resultados menos alentadores para Ecuador se evidencian en Araújo et al (2017), quienes evalúan el impacto de largo plazo que tienen las transferencias monetarias en la educación de los niños, concluyen que las transferencias tienen un efecto modesto sobre la probabilidad de que los niños de hogares pobres escapen de la pobreza a futuro.…”

“…En este contexto, el objetivo de la investigación es identificar el efecto del gasto público social sobre los niveles de pobreza multidimensional en Ecuador, para lo cual, se construye un índice de pobreza a partir de la teoría de conjuntos difusos y se estima un modelo probit multinomial ordenado con un pool de datos provinciales. A diferencia de otros estudios aplicados para Ecuador (Edmonds y Schady, 2012;Llerena et al, 2015;Araújo et al, 2017;), en esta investigación se utiliza el gasto público social destinado a los servicios de educación, salud y bienestar social a nivel provincial y se evalúan sus efectos en una medida multidimensional de pobreza acorde a la tendencia actual de su estudio. De esta manera, se evidencian los efectos del gasto público social sobre una medida que incorpora las diferentes privaciones que enfrentan las personas en situación de pobreza, antes que solo sobre una medida unidimensional como la renta.…”

Cash transfer and multidimensional child poverty: evidence from Ghana

“…For instance, it is the priority of the United Nations to reduce poverty in all dimensions by 2030 [Sustainable Development Goals (SDGs) 1.2]. Majority of the poor families in developing countries are financially constrained, which usually results in under-investment in the human capital of their children (Araujo et al, 2017). Over 1.6 billion were classified as multidimensionally poor globally .…”