Making Conditional Cash Transfer Programs More Efficient: Designing for Maximum Effect of the Conditionality

Conditional Cash Transfer (CCT) programs ,are now ,extensively used to induce ,poor parents to increase investment in the human,capital of their children. These programs can be large and expensive, motivating the quest for greater efficiency in increasing the impact of the imposed condition on human capital formation. This requires designing the programs’ targeting and calibration rules specifically to achieve,this result. Using data from the Progresa randomized experiment in Mexico, we show that large efficiency gains can be achieved ,by taking ,into account how the probability of enrollment ,of a child is affected by a ,cash transfer. Calibration of the ,transfers relies on heterogeneity, in responses due to child, household, and community characteristics. Rules for targeting and calibration can be made ,easily implementable by selecting ,indicators that are simple, observable and verifiable, and that cannot be manipulated by beneficiaries. In the case under study, results show that these efficiency gains can be achieved without rising inequality among,the poor. Alain de Janvry and Elisabeth Sadoulet, Giannini Hall 207, University of California, Berkeley, California