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Extract:
One of the Tragedies of Poverty is its Intergenerational Transmission
Children who grow up in poverty remain poor
- Poor invest less in children’s health & education
Enter adulthood without “basic capabilities”
- Not able to take advantage of labor market opportunities
- Less capable of pulling themselves out of poverty
- Lower quality of Life
Health is a Critical “Capability”
Most Long-Term Poverty Alleviation Policies
- Focus on Schooling
But, Health is also important
- Health & Nutrition in formative years affects growth & cognitive development
- Healthier kids get more schooling & do better in school
- Healthier adults have higher wages & higher quality of life
PROGESA Addresses Immediate & Long-Term Problems of Poverty
Cash transfer Immediate needs
- Hunger
- Disease and illness
- Living conditions
Break inter-generational transmission
- Invest in children’s Education, Health & Nutrition
- Improve children’s “capabilities”
- Pull themselves out of poverty
- Lead a high quality of life
PROGRESA is an Incentive-Based Welfare PROGRAM
Cash transfer is used as incentive to invest in human capital
- Education, Health & Nutrition
- Cash conditional on staying in school, preventive health care, nutrition monitoring
Primarily focused on children
- Adults benefit as well (health)
PROGRESA is a Big Program
Rural Program 1997-2000
- 2.6 million families from 50,000 villages
- 40% of rural families
Urban Expansion 2001-2003
- Added 2 million families
Annual Budget
- US$2.6 Billion budget or 0.5% of GDP
Traditional Approaches to Improving Health
1. Cash transfer Programs
2. Improving Programs
- E.g. prenatal, family planning, nutrition monitoring & supplement, primary care…
- Access (travel time & prices)
- Availability & quality services
- Patient knowledge about availably and efficacy
Do Cash Transfer Programs Have an Impact on Health?
Assume problem is lack of income
- But, families may have other priorities for cash
Evidence?
- Currie (2000) finds no effect in US
- Dulfo (2001) finds some effect in South Africa
Mixed evidence on income effect on health in developing countries
Expanding Supply Has Less than Desired Effect
Mixed evidence these programs have impact
- No big increases in population health indicators
Problems:
- Low take-up rates
- Selected program participation
- Most needy least likely to choose to participate
- Non-participants are ones who get no care
- Participants substitute program for other care
PROGRESA Overcomes Problems of Traditional Approaches
Relaxes income constraint through cash transfer
Provides financial incentive to use health services
- 97% take-up rate (Mexico’s PROGRESA)
- No selection effects
- Those most in need get access to services
In Contrast to Traditional Approaches…..
We Find That PROGRESA…
Improved child health
- Reduced hospital inpatient stays
- Reduced morbidity
- Taller & Less Anemia
Improved adult health
- Reduced hospital inpatient stays
- Reduced illness days
- Improved stamina
PROGRESA Also Overcame Political Economy Problem
Politicians reluctant to spend on investments that have long-term return
- e.g. child health & nutrition
- Politicians come up for election before families fully benefit
Cash part of CCT attractive as yields short-run political payoff
Use a Randomized Experiment to Evaluate Impact on Child Health
Randomized 506 rural villages into control and treatment groups
After 18 Months Find that PROGRESA Improved child health as indicated by
- Reduced morbidity
- Taller & Less Anemia
After 5 years find big effects on growth & physical health but little on cognitive develop.
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