Development Economics

Are Conditional Cash Transfers Really the Answer?

[caption id="" align="alignright" width="300" caption="Genius"][/caption] A while back I wrote about conditional cash transfers, which are the next biggest thing in development, in a post called "Where's My Money, Fool," titled so as an homage to the curler-wearing drug dealer Big Worm in the movie "Friday." The most successful example of a good CCT program is Bolsa Familia, a government program in Brazil which has helped to increase incomes for poor families by 7 times as much as incomes for the rich (albeit, off a lower baseline).  Brazil has seen its poverty level drop faster than Snooki inside a plastic Zorb-like ball in the Jersey Shore on New Years Eve.  Specifically, the number of people living in poverty has dropped from 22% to 7% over the last decade. The theory behind conditional cash transfers is simple.  The government pays poor families for meeting certain requirements.  Attendance in school and maintaining standards of healthcare are rewarded with monthly payments.  As long as the family achieves the targets of the program, they are eligible for a payout.  The outcome is two-fold.  First, the family gets immediate relief in the form of cash payments from the government, which can be put toward food and education.  Second, the underlying conditions that cause the unbreakable cycle of poverty to unbroken - lack of education due to the demands of meeting financial needs for the household - are addressed, as financial incentives eliminate the need to pull kids from school to help their parents earn income for the family.  An explanation from the New York Times:

The program fights poverty in two ways.  One is straightforward:  it gives money to the poor.  This works.  And no, the money tends not to be stolen or diverted to the better-off.   Brazil and Mexico have been very successful at including only the poor.  In both countries it has reduced poverty, especially extreme poverty, and has begun to close the inequality gap. The idea’s other purpose — to give children more education and better health — is longer term and harder to measure.  But measured it is — Oportunidades is probably the most-studied social program on the planet.  The program has an evaluation unit and publishes all data. There have also been hundreds of studies by independent academics. The research indicates that conditional cash transfer programs in Mexico and Brazil do keep people healthier, and keep kids in school.
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