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

M. Caridad Araujo (), Mariano Bosch () and Norbert Schady
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Mariano Bosch: Inter American Development Bank

No 2016-030, Working Papers from Human Capital and Economic Opportunity Working Group

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 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 inter-generational transmission of poverty in Ecuador is likely to be modest.

Keywords: poverty; human capital; liquidity constraints; educational attainment (search for similar items in EconPapers)
JEL-codes: I30 J24 J13 I00 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev, nep-exp and nep-lam
Date: 2016-11
Note: ECI
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http://humcap.uchicago.edu/RePEc/hka/wpaper/Araujo ... transfers-escape.pdf First version, November, 2016 (application/pdf)

Related works:
Chapter: Can Cash Transfers Help Households Escape an Intergenerational Poverty Trap? (2017) Downloads
Working Paper: Can Cash Transfers Help Households Escape an Inter-Generational Poverty Trap? (2017) Downloads
Working Paper: Can Cash Transfers Help Households Escape an Inter-Generational Poverty Trap? (2016) Downloads
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