Conditional cash transfers (CCTs) make payments to households conditional on human capital investments in children. Compared to unconditional cash transfers (UCTs), CCTs may exclude some low-income households as access is tied to normal investments. However, we argue that conditions on children's school enrollment offer an unexplored targeting benefit over UCTs: CCTs target money to households who forgo child income. We show that the size of this targeting benefit is related to two elasticities already popular in the literature: the income effect of a UCT and the price effect of a CCT. We estimate these elasticities for the CCT program Progresa using variation in transfers to younger siblings to identify income effects. We find that the targeting benefit is almost as large as the cost of excluding some low-income households; this implies that 41% of the Progresa budget should go to a CCT over a UCT based on targeting grounds alone.
Contact: Mike Gilraine (firstname.lastname@example.org)