Can cash transfers improve well-being across generations?

Conditional cash transfers (CCTs) have been central to social policy in Latin America for three decades. By providing cash to low-income households conditional on children’s school attendance, governments aim to reduce poverty today and invest in human capital for tomorrow (Fiszbein and Schady 2009, García and Saavedra 2022, Banerjee et al. 2024).

The short-run evidence is clear: CCTs increase school enrolment and attainment. But whether those schooling gains translate into higher adult earnings – and whether benefits spill over to the next generation – remains an open question. In several settings, schooling gains did not consistently translate into improved skills (Levy and Schady 2013, García and Saavedra 2022), and long-run labour market impacts have been mixed or not yet observed (Molina-Millán et al. 2020, Parker and Vogl 2023, Araujo et al. 2024). Evidence on intergenerational effects is even more limited, with the exception of recent work from a randomised controlled trial of secondary school scholarships in Ghana (Duflo et al. 2024).

In new research (Lucas, McEwan, and Irribarra 2026), we study the long-run and intergenerational effects of Chile’s Beca Indígena programme, a large-scale conditional cash transfer for indigenous students. We find that sustained, well-implemented CCTs can increase human capital – both for recipients and for their children – and the earnings of the recipients, leading to reductions in ethnic inequality.

A nationwide programme targeting indigenous inequality

Indigenous populations in Latin America experience persistent gaps in schooling and earnings (McEwan 2004, Ñopo 2012, World Bank 2015). In Chile, around 10% of the population claims indigenous ancestry, predominantly Mapuche.

Since 1991, the Beca Indígena programme has provided renewable grants to indigenous students enrolled in upper-primary, secondary, and tertiary education. Eligibility requires:

• Certified indigenous ancestry
• Enrolment in school
• Minimum prior-year grades
• Household income below a proxy-means threshold

Grants are substantial relative to household income and renewable across schooling levels. Since its start in 1991, the programme has expanded dramatically, from 300 grants in 1991 to over 92,000 by 2021. This annual variation in available grants allows us to study how increasing exposure to the programme affected cohorts over time, using untreated non-indigenous individuals born in the same location and the same year as the counterfactual.

Difference-in-differences research design

The research design exploits two features of the programme context:

1. Non-indigenous children were never eligible.
2. Indigenous children born after 1974 were increasingly exposed to grants as the programme expanded.

Within the same birth communes (Chile’s smallest territorial unit), we compare indigenous and non-indigenous cohorts born in different years. This allows us to account for local economic conditions, school quality, and place-based policies that might otherwise confound results.

Rather than tracking individual receipt, which is endogenous, we estimate intent-to-treat effects based on a cohort’s expected years of exposure. To implement the empirical strategy, we assemble large samples of adults – and their labour market outcomes – from CASEN household surveys between 2006 and 2024, linked to their birth communes. We also use SIMCE national assessments from overlapping birth cohorts to explore effects on learning.

Long-run gains in schooling, work, and earnings

The results on schooling and labour market outcomes are large and remarkably consistent. 

 Among the most exposed indigenous cohorts (those born 1992 to 2000):

• schooling increased by 0.6 years, and
• labour earnings increased by 20%.

This increase in labour earnings includes individuals with zero earnings and reflects that

• the likelihood of working in the last week increased by 4 percentage points, and
• weekly hours worked rose by 8%.

Scaling results to an additional expected year of grant exposure (the average causal response) implies

• a 0.3-year increase in schooling,
• a 10% increase in labour earnings,
• a 2-percentage point increase in labour force participation, and
• a 4% increase in hours worked.

The magnitudes are economically meaningful relative to pre-treatment ethnic gaps. The programme reduced the gap between indigenous and non-indigenous individuals by roughly 44% and the earnings gap by about 70%.

Crucially, we find no evidence of differential pre-treatment trends or differential post-treatment trends in other schooling inputs or household income per capita. We rule out other threats to internal validity, including concurrently implemented programmes and endogenous misclassification of indigenous status.

What else did the programme do?

With the rationing of the transfers, students with relatively higher GPAs were prioritised for initial receipt and all students had to meet a GPA threshold for renewal. Consistent with these incentives, we find indigenous students’ test scores increased relative to their non-indigenous peers, accompanied by rising parental expectations for children’s tertiary education attainment.

We show that human capital gains can account for the entirety of overall labour market impacts. Using auxiliary estimates of returns to schooling and cognitive skills, the predicted labour market gains from our human capital estimates closely match observed effects on labour participation and earnings.

In contrast, we do not find evidence that effects operated through migration, improved adult health, or reduced teenage fertility. The main mechanism appears to be sustained investment in human capital.

Intergenerational spillovers

Perhaps most striking are the effects on recipients’ children. An additional year of maternal grant exposure increased children’s test scores by 0.15 standard deviations and grade point averages by 0.18 standard deviations.

These are large gains relative to baseline ethnic achievement gaps. We show several plausible mechanisms for these causal effects on learning. Foremost, maternal exposure increased women’s schooling and earnings, the schooling of women’s partners, and household income per capita. Children of exposed mothers were more likely to attend selective, fee-charging private schools and to have peers with more highly educated mothers.

At the same time, they were less likely to receive means-tested transfers or indigenous grants themselves, reflecting higher household incomes. These results contrast with evidence from Europe and the US showing intergenerational persistence in welfare participation (Dahl et al. 2014, Hartley et al. 2022). Here, maternal exposure reduced reliance on transfers in the next generation.

Do the benefits exceed the costs?

We estimate the marginal value of public funds (MVPF) following Hendren and Sprung-Keyser (2020). For the 1999–2000 birth cohorts of indigenous children:

• Net government expenditure per eligible child ≈ US$566
• Present value of increased after-tax earnings per eligible child ≈ US$16,106

This implies an MVPF of approximately 29. Even under very conservative assumptions – halving the estimated earnings effects – the MVPF remains above 6. Importantly, this calculation excludes intergenerational benefits. Including them would raise the welfare estimate further.

Why did this CCT succeed?

Not all CCTs generate large, long-run returns. Several features of the Chilean context were likely important and help explain why schooling gains translated into earnings gains.

1. Institutional stability. The programme operated under consistent rules for over 30 years.
2. Renewability across schooling levels. Financial incentives extended from primary through tertiary education.
3. Grade requirements. Conditionality created high-stakes performance incentives that increased student learning.
4. Rising school quality. Chile invested heavily in education over this period.
5. Favourable labour markets. Economic growth created demand for skilled workers.

Implications for policy

The global debate on social protection increasingly focuses on long-run productivity effects rather than short-run poverty reduction (Banerjee et al. 2024). Our findings contribute three lessons:

1. Well-implemented CCTs can produce sustained earnings gains and increased welfare for disadvantaged populations.
2. CCTs can generate intergenerational spillovers that amplify returns.
3. Targeting historically disadvantaged ethnic groups can reduce inequality at scale.

For policymakers weighing investments in social protection, the results suggest that policy design details – including renewability, performance incentives, and institutional credibility – may be decisive.

References

Araujo, C, S Baird, S Das, B Özler, L Parisotto, and T Woldehanna (2024), “Social protection and youth,” Unpublished manuscript.

Banerjee, A, R Hanna, B A Oken, and D S Lisker (2024), “Social protection in the developing world,” Journal of Economic Literature, 62(4): 1349–1421.

Dahl, G B, A R Kostøl, and M Mogstad (2014), “Family welfare cultures,” Quarterly Journal of Economics, 129(4): 1711–1752.

Duflo, E, P Dupas, E Spelke, and M Walsh (2024), “Intergenerational impacts of secondary education: Experimental evidence from Ghana,” Unpublished manuscript.

Fiszbein, A, and N Schady (2009), "Conditional cash transfers: Reducing present and future poverty," World Bank.

García, S, and J Saavedra (2022), “Conditional cash transfers for education,” Unpublished manuscript.

Hendren, N, and B Sprung-Keyser (2020), “A unified welfare analysis of government policies,” Quarterly Journal of Economics, 135: 1209–1318.

Levy, S, and N Schady (2013), “Latin America’s social policy challenge,” Journal of Economic Perspectives, 27(2): 193–218.

Lucas, A M, P J McEwan, and D Torres Irribarra (2026), “The long-run and intergenerational effects of conditional cash transfers: Evidence from Chile’s indigenous grants,” Unpublished manuscript.

McEwan, P J (2004), “The indigenous test score gap in Bolivia and Chile,” Economic Development and Cultural Change, 53: 157–190.

Molina-Millán, T, K Macours, J A Maluccio, and L Tejerina (2020), “Experimental long-term effects of early-childhood and school-age exposure to a conditional cash transfer program,” Journal of Development Economics, 143.

Ñopo, H (2012), "New century, old disparities: Gender and ethnic earnings gaps in Latin America and the Caribbean," Inter-American Development Bank.

Parker, S W, and T Vogl (2023), “Do conditional cash transfers improve economic outcomes in the next generation? Evidence from Mexico,” Economic Journal, 133: 2775–2806.

World Bank (2015), "Indigenous Latin America in the twenty-first century."