Crowding out or crowding in? Private investments in human capital under Conditional Cash Transfer programs

Available from: 
October 2013
Paper author(s): 
Marcio Vargas da Cruz (Graduate Institute, Geneva)
Zacharias Ziegelhofer (Graduate Institute, Geneva)
Topic: 
Education - Health
Poverty - Inequality - Aid Effectiveness
Year: 
2013

Lacea2013
In recent years, conditional cash transfer (CCT) programs have become an important component of social policy in developing countries. While the direct impacts of the conditionalities have been well researched, less is known about their impact on private expenditure decisions. This aspect has great policy relevance since changes in private household expendi- tures can either support or counteract the aim of the programs. In this paper, we investigate the impact of a CCT program on private household expenditure decisions in nutrition, health and education which we see as principal components of child human capital. We first discuss household behavior under a CCT program and show how intra-household preferences and perceptions on the substitutable or complementary character of investments can impact household resource allocation decisions. Subsequently, we test the theoretical implications in the context of the Brazilian CCT program Bolsa Familia, using the Brazilian household expenditure survey. We find evidence that households increase their private expenditure in food and education disproportionally to the amount of cash transfer, that is, more than would be expected when considering the Engel curves of the expenditures under question.

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Beyond the income effect : impacts of conditional cash transfer programs on private investments in human capital

 

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Research section: 
Lacea 2013 annual meeting
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