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EXPLORING THE CONDITIONAL NATURE OF CONDITIONAL CASH TRANSFER PROGRAMES

Anti-poverty policies across the world have taken different shapes, from the implementation of a minimum national wage to the application of progressive taxes, specially in developed countries. However, when considering the strategies disseminated in emerging economies, the policies sometimes diverge: a noticeable and controversial policy that has been implemented throughout Latin America and Asia is the Conditional Cash Transference Program (CCT).

The CCTs are welfare programs conditional on the recipient’s compliance with a set of criteria defined by the government, that ranges from school attendance in the case of Bolsa Familia in Brazil to the participation in the vaccination process in the case of the Pantawid Pamilyang Pilipino Program in the Philipines. The aim of these criteria is to increase the human capital of children with the goal of reducing the transmission of poverty from one generation to the next.

However, CCTs have receive widespread criticism due to the difficulty in making them cost efficient and having them reach the target population correctly without leaking to higher-income groups (Perkins et al, 2013).

The arguments for conditionality are straightforward and can be made both from a public and private perspective, as presented in the paper by Braw and Hoddinott (2010): the government may think they know what is better for the poor better than the poor know themselves and by providing these transfers they will be more capable to modify behavior. Another argument from a public perspective is more political in the sense that taxpayers may be more likely to support these transfers if they have a conditional link to improving the welfare of children, either through education or healthcare (Fiszbein and Schady, 2009). From a private perspective, the conditional factor may resolve household disagreements regarding the allocation of resources and from a behavioral economics perspective, a study by Laibson (1997) shows that households with hyperbolic functions, undertake actions that can reduce their own welfare which makes these programs more effective if conditional.

On the other side, there are arguments against the conditional nature of these transfers, the strongest one is made from a human rights perspective: social protection is part of the Universal Declaration of Human Rights and therefore, there should not be a set of conditions attached to these transfers (Freelander, 2007). Other arguments may be related to the potential corruption of individuals who need to certify these conditions but also the paternalistic view that poor people do not know how to make decisions from themselves is rather questionable. From a financial standpoint, the administrative cost of monitoring these programs increases on average 2% of the total cost of these programs (Caldes et al., 2006)

Thus, the question arises regarding the need to make transfers conditional in order for them to work. Braw and and Hoddinott (2010) analyzed the conditionality aspect of the CCT program in Mexico PROGRESA, by assessing the impact of imposing criteria on the school enrollment and therefore evaluating the accumulation of human capital, a key aspect in combating poverty. To assess whether these criteria were relevant, the researches benefited from the fact that some PROGRESA beneficiaries did not receive the papers required to monitor the children’s school attendance. The result of their research allowed them to reach the following conclusions: on average, the lack of these monitoring capacities increased the probability of children skipping school. There is an argument for conditionality: in fact, the research shows that there are extensive benefits from conditioning, specially at a lower secondary level when compared to primary level (in which, children are becoming increasingly enrolled, regardless of these incentives). These results are aligned with prior research conducted by de Janvry and Sadoulet (2006).

The conditionality of CCTs has been debated for its humanitarian aspect as well as its need to make the program work. Critics seem to believe that given monetary incentives, families would choose to enroll children in school, regardless of this being conditional to receive the government support. Despite the administrative cost associated with monitoring conditionality, research shows that there are large benefits associated with this aspect of the program when analyzing student enrollment. Incentivizing families to enroll children in schools will lead to the accumulation of human capital and may work as a tool for combating poverty.

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Author: studentnovasbe

Master student in Nova Sbe

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