Conditional Cash Transfers and Human Capital: A Comprehensive Analysis of Long-Term Impacts

CCTs were first introduced in 1997 with Mexico’s Conditional Cash Transfer (CCT) program, Progresa, and have since spread throughout more than 80 countries, including the U.S. and the U.K. CCTs represent key government instruments for reducing poverty, through the provision of monetary transfers to poor families with young children, conditional on investments in children’s human capital. CCTs serve millions of households and their costs are substantial.

While a number of studies have shown that CCTs have successfully raised children's schooling, improved child's nutrition, promoted child vaccinations and health care visits, and increased household consumption (Baird et al., 2014; Fiszbein and Schady, 2009; Garcia and Saavedra, 2017; Molina-Millan et al., 2016; Parker and Todd, 2017), less is known on whether these short-term improvements translate to better education, learning, and economic outcomes in the next generation. Because one the program’s aims are to raise children out of poverty, information on their long-run outcomes is vital for assessing the efficacy of CCTs. The lack of evidence reflects the necessity of a long follow-up for measuring long-term impacts on young adults who were exposed to program in their early years, and often, long follow-ups of experimental evaluations are generally costly or difficult to put into practice, facing big challenges in terms of selective attrition or endogenous migration (Blattman et al., 2017).

The goal of this paper is to study the educational and economic outcomes of the program’s earliest beneficiaries, who were either in childhood or in primary school age when the program began and who are now entering the labour market. Using the universe of participants in Colombia's CCT program "Familias en Accion" linked to a myriad of admin records (the universe of students in public schools, college records, formal sector employment, and future welfare participation), the empirical strategy estimates a regression discontinuity design (RDD) of program participation to provide evidence on the long-term impacts of CCTs on high school graduation, achievement test score, college entrance and major, and labor force participation. By focusing on a nationwide program at scale and by using administrative records, this study: i) provides estimates that improve on precision and external validity with respect to previous CCTs studies and ii), report new effects on the returns to health and educational investments during the initial stages of an individual’s life on medium and long-term outcomes, which could improve the targeting of interventions across the world.

Preliminary results show that children who received the CCT in childhood experienced a positive and significant increase in high school completion of 30% and an increase in the end-of-high school mandatory school exam of 0.13 SD. The fact that there is a positive effect on the end-of-high school exam suggests that students are more likely to enter college and self-select into certain majors. Results on education seem to be larger for boys than for girls.