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Consumption Smoothing and Frequency of Benefit Payments of Cash Transfer Programs

Emma Aguila (), Arie Kapteyn () and Francisco Perez-Arce

American Economic Review, 2017, vol. 107, issue 5, 430-35

Abstract: We analyze two noncontributory Mexican pension programs for the elderly. Both paid similar amounts, but one paid monthly while the other paid every two months. The Life Cycle Hypothesis suggests frequency of benefits payments should not affect consumption smoothing, but we find the monthly program was more effective in smoothing food expenditure. It also increased doctor visits and reduced the incidence of hunger spells. Under the bimonthly program, expenditures on food significantly decline between paychecks but ownership of durable goods increased. This suggests the importance of payment frequency in social programs.

JEL-codes: D12 D91 I14 I18 I38 (search for similar items in EconPapers)
Date: 2017
Note: DOI: 10.1257/aer.p20171147
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Handle: RePEc:aea:aecrev:v:107:y:2017:i:5:p:430-35