Magazine article Chicago Policy Review (Online)

Unconditional Cash Transfers: Lessons from Ecuador

Magazine article Chicago Policy Review (Online)

Unconditional Cash Transfers: Lessons from Ecuador

Article excerpt

Poor people, especially in developing countries, have inadequate financial resources and face liquidity issues which constrain expenditures on their children’s health and education. Cash transfers ease these constraints by providing households with financial support. To ensure that cash transfers are spent on essential needs, transfers can be attached to specific conditions such as mandatory vaccinations or school attendance requirements for children. If cash transfers are tied to such conditions, they are defined as conditional cash transfers. Unconditional cash transfers, on the other hand, place no constraints on recipients spending.

Araujo, Bosch and Schady (2016) present an overview of the largest cash transfer program in Latin America, known as Bono de Desarrollo Humano (BDH), which was introduced in Ecuador in 2003. They evaluated BDH’s impact on children’s education outcomes in households that participated in the unconditional cash transfer program.

The BDH program covered 40 percent of households in Ecuador, and the transfer amount was 20 percent of the average income of participating households. More specifically, each household received $15 in 2003, which increased to $35 and $50 in 2009 and 2014, respectively. A poverty score determined eligibility which was derived from a household census that included household composition, home value, access to services, and income, among other factors. No conditions were attached to the transfers; however, households were encouraged to spend transfer income on their children.

The authors evaluated whether receiving cash transfers as part of BDH changed education outcomes of children whose families participated in the program, focusing on two specific questions. First, is it better to target “early childhood families”-households with children under six years old-versus other families? Or, given that education in Ecuador is free and mandatory until age 14, is it preferable to target families with children over 11 years old so that resources are provided when children decide whether or not to continue their education?

To answer the first question, eligible households were first randomly allocated into two groups. The first group received transfers in 2004 while the second group received transfers three years later. …

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