Encouragement and Distortionary Effects of Conditional Cash Transfers

Gharad Bryan (), Shyamal Chowdhury (), Ahmed Mobarak, Melanie Morten () and Joeri Smits ()
Additional contact information
Gharad Bryan: London School of Economics
Shyamal Chowdhury: University of Sydney
Melanie Morten: Stanford University
Joeri Smits: Harvard Kennedy School

No 14326, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Conditional cash transfer (CCT) programs aim to reduce poverty or achieve other social goals by making the transfers conditional upon the receivers' actions. Conditions are designed to encourage some desirable behavior that recipients might otherwise under-invest in. An unintended consequence of the conditionality may be to distort recipients' actions in ways that lower their welfare. The transfer size plays an important role in shaping such distortionary effects. In certain circumstances, a larger transfer increases distortion more than that it raises benefits from stronger encouragement, implying that (i) there is an optimal transfer size for CCTs, and (ii) unconditional cash transfers (UCTs) may be better than CCTs when the transfer amount is large. We illustrate a range of distortions arising from CCT programs around the world. We then introduce an experimental design that permits a test of this distortionary effect, and implement it in a cash transfer program conditional on seasonal labor migration in rural Indonesia. We find that when the transfer size exceeds the amount required for travel expenses, distortion increases and CCT program outcomes deteriorate.

Keywords: distortion; conditional cash transfers; seasonal migration (search for similar items in EconPapers)
JEL-codes: I38 J48 O15 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2021-04
New Economics Papers: this item is included in nep-dev, nep-exp and nep-sea
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://docs.iza.org/dp14326.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp14326

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().