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Cash Transfers & Raising Long-Term Living Standards in Mexico

Financial Inclusion Mexico

Cash transfer programs are increasingly common across developing countries. Conditional cash transfer (CCT) programs, in particular, provide incentives for parents to invest in the human capital of their children by making the cash conditional on certain behaviors. In 1997, the Mexican government implemented a national conditional cash transfers program called PROGRESA, later Oportunidades, which distributed approximately US$4.5 billion to 5.8 million beneficiary households by 2010. This study evaluates the impacts of the Oportunidades CCT program on poverty. Results find that the program led to a 9.6 percent increase in agricultural income for treatment households. Researchers estimate that for each peso transferred, households consume 74 cents and invest the remaining 26, permanently increasing long-term consumption by about 1.6 cents. Findings further suggest that cash transfers can achieve long-term increases in consumption through investment in productive activities. Four years after households in the comparison group were incorporated into the program, consumption levels for treatment households were 5.6 percent higher, suggesting improvements in their long-term living standards. Beneficiary households, therefore, would be unlikely to revert to pre-program poverty levels. This landmark study informed the scale up of CCT programs by dozens of governments across the globe.

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