Conditional cash transfers, preferences and educational aspirations

Research story 7th Nov 2016

Over the past two decades, many developing countries have implemented Conditional Cash Transfer (CCT) programs to increase human capital in poor households and break the intergenerational transmission of poverty. These programs have been found to lift health and educational outcomes, but what is driving these improvements?

Professor Lisa Cameron and Dr Diana Contreras Suarez investigated whether CCT programs change caregivers' preferences so that they're
more willing to delay present consumption in order to invest in the future and increase their educational aspirations for their children.

They found no evidence of changes in time preferences or educational aspirations, implying that the positive CCT program impacts are driven by the monetary incentives and conditions that form part of the programs, with no deeper behavioural change occurring.

What are CCT programs?

Under CCT programs, poor households receive regular monetary transfers on the condition that they invest in the human capital of their children, typically by sending them to school, taking them to medical check-ups and attending information sessions. These programs are often justified as a means of
overcoming distortions in parents' decision-making.

What did we do?

Drawing on survey data from 2012, we used a regression discontinuity design to investigate whether participation in Familias en Acción (a 2.8 million household Colombian CCT program) affects caregivers’ time preferences and aspirations for their children's education, both while receiving the transfers and over a period of up to nine years after exiting the program.

What did we find?

We found that Familias en Acción:

  • Did not change caregivers’ time preferences – there was no evidence that the program made participants more willing to delay present consumption in order to invest in the future.
  • Did not increase caregivers’ educational aspirations – there was no evidence that the program boosted participants’ expectations as to the level of education their children would attain.
  • Lowered caregivers’ educational aspirations – program participation was associated with caregivers attaching a lower probability to the likelihood of their children finishing tertiary education, particularly in urban areas.

What does this mean?

Our findings suggest that the monetary transfers and conditions under CCT programs drive their positive impacts rather than changes in participants’ preferences and aspirations. They also suggest that households may come to depend on the transfers to educate their children, and thus have lower
educational aspirations for their children once the program ends (at age 18).

From a policy perspective, this means that CCT programs like Familias en Acción require ongoing financial incentives to increase human capital. If the transfers were to stop, program benefits would be limited to those obtained in the course of the program, and the health and education of subsequent children would likely revert to pre-program levels.

To find out more

  • Read the paper: Conditional Cash Transfers: Do They Change Time Preferences and Educational Aspirations?
  • View the flyer: Conditional Cash Transfers, Time Preferences & Educational Aspirations