Conditional Cash Transfers : Reducing Present and Future Poverty

Abstract

The report shows that there is good
 evidence that conditional cash transfers (CCTs) have
 improved the lives of poor people. Transfers generally have
 been well targeted to poor households, have raised
 consumption levels, and have reduced poverty, by a
 substantial amount in some countries. Offsetting adjustments
 that could have blunted the impact of transfers, such as
 reductions in the labor market participation of
 beneficiaries, have been relatively modest. Moreover, CCT
 programs often have provided an entry point to reforming
 badly targeted subsidies and upgrading the quality of safety
 nets. The report thus argues that CCTs have been an
 effective way to redistribute income to the poor, while
 recognizing that even the best-designed and best-managed
 program cannot fulfill all of the needs of a comprehensive
 social protection system. CCTs therefore need to be
 complemented with other interventions, such as workfare or
 employment programs and social pensions. The report also
 considers the rationale for conditioning the transfers on
 the use of specific health and education services by program
 beneficiaries. Conditions can be justified if households are
 under investing in the human capital of their children, for
 example, if they hold incorrect beliefs about the returns to
 these investments; if there is "incomplete
 altruism" between parents and their children; or if
 there are large externalities to investments in health and
 education. Political economy considerations also may favor
 conditional over unconditional transfers: taxpayers may be
 more likely to support transfers to the poor if they are
 linked to efforts to overcome poverty in the long term,
 particularly when the efforts involve actions to improve the
 welfare of children.