Investing Cash Transfers to Raise Long-Term Living Standards

Using data from a randomized experiment, we find that poor rural Mexican households invested part of their cash transfers from the Oportunidades program in productive assets, increasing agricultural income by almost 10 percent after 18 months of benefits. We estimate that for each peso transferred,...

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Bibliographic Details
Published in:American economic journal. Applied economics 2012-01, Vol.4 (1), p.164-192
Main Authors: Gertler, Paul J., Martinez, Sebastian W., Rubio-Codina, Marta
Format: Article
Language:English
Subjects:
Age
Agricultural production
Cash transfers
Children
Communities
Consumer economics
Economic models
Economic policy
Economic statistics
Economic theory
Experiments
Household consumption
Households
Human capital
Hypotheses
Investment
Investment income
Long term investments
Marginal propensity to consume
Meetings
Poverty
Propensity to consume
Rural areas
Standard of living
Studies
Transfers
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Summary:Using data from a randomized experiment, we find that poor rural Mexican households invested part of their cash transfers from the Oportunidades program in productive assets, increasing agricultural income by almost 10 percent after 18 months of benefits. We estimate that for each peso transferred, households consume 74 cents and invest the rest, permanently increasing long-term consumption by about 1.6 cents. Results suggest that cash transfers can achieve long-term increases in consumption through investment in productive activities, thereby permitting beneficiary households to attain higher living standards that are sustained even after transitioning off the program.
ISSN:1945-7782
1945-7790
DOI:10.1257/app.4.1.164