Timing matters: Long-term impacts of Conditional Cash Transfers in Nicaragua

Interventions aimed at increasing the nutrition, health, and education of children are often motivated by their potential to break the intergenerational transmission of poverty. Theory suggests that investments in child human capital can improve future economic outcomes, and while there is substantial evidence that a variety of interventions can increase human capital in low- and middle-income countries in the short term, less is known about whether they live up to their promise in the longer term. There is also little evidence on the potential importance of the timing of interventions during late childhood. In our research (Barham, Macours and Maluccio 2024) we examine these questions for a prominent example in this class of interventions, the conditional cash transfer (CCT) programme. Started in 1997 in Mexico and Brazil, CCTs spread to 60+ countries worldwide and covered 25% of Latin America by 2013. Specifically, we study the Red de Protección Social, a CCT implemented in rural Nicaragua.

The Conditional Cash Transfer implemented in rural Nicaragua

The Red de Protección Social made transfers every two months to female caregivers averaging 18% of total pre-programme household expenditures. Households were only eligible to receive the programme for a fixed three-year period, after which it was not possible to renew. The transfers came with formal enforced conditionalities in health and education. The nutrition and health transfer was conditional on preventive healthcare visits for any children under five years old and on attendance by the caregiver at monthly health education workshops. The education transfer required school enrollment and regular attendance. In addition, there was a strong social marketing message that the money was meant for food, health, and education expenditures. A household representative signed an agreement they would comply with the conditions and spend the money as intended, although actual expenditures were not monitored.

Measuring the impacts of the Red de Proteccion Social

We estimate effects 10 years after the start of the programme by using the randomised phase-in and eligibility rules of the CCT. Households in the early treatment group were eligible for transfers for three years from late 2000 to late 2003; those in the late treatment group were also eligible for transfers for three years, but from 2003 to 2005. In both treatments, all households were eligible for conditional transfers for nutrition and health, and households with children 7–13 years old who had not completed fourth grade were additionally eligible for conditional transfers for education. Together, the conditional transfers provided incentives and resources for the children to remain in school, as well as means to improve food availability and nutrition for them.

To examine the long-term effects, we administered a follow-up survey in 2010 measuring outcomes approximately 10 years after the programme started. Migrants were tracked throughout Nicaragua and to Costa Rica, the main international migration destination. Final attrition is between 4–22% depending on the outcome, is balanced between early and late treatment, and yields analysis samples balanced on baseline observables. Our cohort of interest was 19-22 years old (9-12 at baseline) and transitioning into early adulthood with the majority in their initial years in the labour market. Evidence during this labour market entry period is valuable for understanding the mechanisms underlying the long-term effects of CCTs, particularly if those initial experiences can set individuals on different labour market trajectories.

The long-term impacts of Conditional Cash Transfers in Nicaragua

We find that earlier exposure to the CCT starting at primary school ages when children were at risk of dropout (9–12 years old) increased labour market participation and earnings a decade later when they were young adults. Other differential intent-to-treat effects on intermediate outcomes by sex, however, reveal differences in the underlying mechanisms resulting from the timing of the human capital investments and possibly different sensitive periods.

Earlier intervention boosts economic outcomes

Children exposed to the CCT earlier during primary school had greater labour market participation and 15% higher earnings per month a decade later.

Sex-specific mechanisms

Men

• Earlier exposure at ages when they were likely to drop out of school led to sustained schooling and learning gains of nearly 0.2 standard deviations.

Women

• Earlier exposure increased schooling modestly, but there were no differential effects on learning. This can be explained in part by prior enrollment patterns; girls in rural Nicaragua typically remained in school longer than boys during the early teenage years, and this may have enabled late treatment girls to catch up later when their households were benefitting from the CCT, even if they themselves were not directly exposed to the education component.
• Results also indicate that relative to late treatment, average age of menarche increased for early treatment girls. This difference can be linked to the random variation in the timing of CCT transfer-related nutrition shocks occurring during ages important for physical development. Consistent with their older age of menarche, early treatment girls became sexually active and started childbearing later and had lower body mass compared to those in the late treatment.
• Taken together, the pattern of results for females suggests that in addition to the changes in schooling, the long-term effects on their labour market outcomes reflect CCT induced changes in nutrition and related reproductive health outcomes.

Three key takeaways for designing Conditional Cash Transfers

1. It is important to account for the nutrition and health—and not just education—implications of cash transfer or related programmes when analysing longer-term effects.
2. Both timing and programme design are important; transfers and related nutritional shocks during preteen years can affect the age of menarche, so that the specific ages at which interventions target girls can affect subsequent marriage, fertility, and labour market outcomes.
3. Impacts on different types of human capital (such as education and health) can have similar or reinforcing effects on subsequent outcomes but can also potentially affect outcomes such as fertility and labor market participation in opposite directions.

References

Barham, T, K Macours and J A Maluccio (2024), "Experimental evidence from a conditional cash transfer program: schooling, learning, fertility, and labor market outcomes after 10 years." Journal of the European Economic Association, 22(4): https://doi.org/10.1093/jeea/jvae005.