Do Conditional Cash Transfers Function as Safety Nets? Evidence from Malawi. Sarah Baird (George Washington University) Craig McIntosh (UC San Diego) Berk Özler (World Bank)

Not for citation without explicit permission from the authors. 2 Background and Motivation The conventional argument for CCTs as safety net programs: Regular cash transfer payments allow households to smooth shocks, save for future. Decreasing relative price of schooling may further prevent households from using withdrawal of kids (particularly girls?) from school as a buffering tool. However: If the incentives provided by a CCT are strong enough to keep kids in school even in the face of shocks, well and good. If not, then conditioning the transfers on school attendance will undermine the social protection dimension of CCTs, expose households to the further shock of withdrawal of transfers.

Not for citation without explicit permission from the authors. 3 Background and Motivation Why may dropout expose girls to additional risks in SSA? There is a knife-edge relationship between leaving school and marriage & pregnancy in much of SSA. Teenage girls typically have HIV rates that match men 10 years older, much higher than their male age-mates. Economic pressure may play a direct role in driving sexual risk debut and other risk factors. On the face of it, it appears that ‘Conditional Cash Transfer’ programs, giving money in return for regular school attendance, might have an effect on marriage, pregnancy, and HIV in this context as well as simply on schooling.

Not for citation without explicit permission from the authors. 4 Background and Motivation Conditional Cash Transfers (CCTs) are “… targeted to the poor and made conditional on certain behaviors of recipient households.” As of 2007, 29 countries around the world had some type of a Conditional Cash Transfer program (CCT) in place, with many others planning or piloting one (World Bank, 2009) Unconditional Cash Transfer programs (UCT) are also common and have also been shown to change behaviors on which CCTs are typically conditioned.

Not for citation without explicit permission from the authors. 5 Background and Motivation Whether the conditions are necessary has recently become a bigger debate. Proponents of CCTs point to market failures, which are addressed by the condition.  Evidence (a few slides from now) suggests that the effects of UCTs are (or would be) small to non-existent. The Zomba Cash Transfer Program  Zomba, Malawi: adolescent girls aged who were never married as of baseline.  One arm received CCTs, another arm receives the exact same transfers, but unconditionally (UCT).  Provides an experimental estimate of the impact of the conditionality itself

Not for citation without explicit permission from the authors. 6 The research questions of SIHR: Do the conditions themselves matter in CCT programs, or would households have made the same choices anyway?  To answer this, two randomized arms, one CCT, other UCT. Do the behaviors that we care about respond to transfer size?  Transfer amounts were randomized between $5 & $15 per month. Does it matter whether transfers go to households or girls?  Split of transfers randomized between guardian and beneficiary. Do the programs have a meaning effect on STDs and HIV?  Conduct biomarker testing for HIV, HSV-2, and syphilis. Are impacts on beneficiaries just ‘diverting’ to non-beneficiaries?  Randomize saturation of treatment at village level and track non- beneficiaries to be able to estimate spillover effects experimentally.

Not for citation without explicit permission from the authors. 7 Zomba Cash Transfer Research Design

Not for citation without explicit permission from the authors. 8 Zomba District & Town

Evidence on the relative effectiveness of CCTs vs. UCTs Evidence points us heavily in favor of CCTs.  de Brauw and Hoddinot (2008); Schady and Araujo (2008) – using implementation glitches  Bourguignon, Ferreira, Leite (2003); Todd and Wolpin (2006) – using structural models. Two common themes to these papers:  All from Latin America (Brazil, Ecuador, and Mexico)  All with very little ‘income’ effect. Not for citation without explicit permission from the authors. 9

10 Zomba Cash Transfer Program Implementation For CCT recipients, attendance is checked monthly at each program school using a combination of physical checks and phone calls (with random spot checks in Year 1, i.e. 2008). For CCT recipients, the payment for the next month is withheld if attendance is below the required threshold. However, the girl remains in the program. UCT recipients receive their transfers by only showing up.

Not for citation without explicit permission from the authors. 11 Making the initial offers, Fall 2007.

Not for citation without explicit permission from the authors. 12 Program impacts on schooling: Enrollment

Not for citation without explicit permission from the authors. 13 Program impacts on schooling: Test Scores

Program impacts on marriage and pregnancy Not for citation without explicit permission from the authors. 14

How do we reconcile the differential program impacts on schooling vs. marriage & pregnancy? To help think about this issue, we can categorize the target population into three latent strata: 1. UCT compliers: Remain in school under a UCT. 2. CCT compliers: Remain in school under a CCT but not under a UCT. 3. Non-compliers: Drop out of school even under a CCT.  UCT compliers will likely be similar under CCT and UCT.  CCT compliers have a schooling impact under a CCT only.  Non-compliers have an income impact under a UCT only. Not for citation without explicit permission from the authors. 15

Marriage and Enrollment at Follow-up Not for citation without explicit permission from the authors. 16

Impacts on partner age: Not for citation without explicit permission from the authors. 17

Not for citation without explicit permission from the authors. 18 Shock & Program impacts on Expenditures:

Not for citation without explicit permission from the authors. 19 Program doesn’t change incidence of shocks:

Not for citation without explicit permission from the authors. 20 Program doesn’t change response to shocks:

Social Protection from Mom only: Not for citation without explicit permission from the authors. 21 Program helps insulate girls against shocks, but only in female-headed households!

Concluding Discussion Cash transfer programs have strong effects on consumption. Do not appear to change the incidence of or response to shocks. Social Protection role of UCT appears superior in the sense that the CCT is cutting household off just at the moment that the girls are most vulnerable. Social Protection role of the CCT in preventing shocks from adversely effecting girls is found only in female-headed households. Clear evidence that adolescent girls in Malawi expose themselves to STD & HIV risk because of economic factors; they cease to do this when provided with income support. Very little sensitivity to transfer amounts, splits.  Suggests that a simple inexpensive program with transfer to households will be just as effective. Not for citation without explicit permission from the authors. 22

Thank you Not for citation without explicit permission from the authors.23

Offer Letters Conditional Transfers The Zomba Cash Transfer Program (ZCTP) with funding from the World Bank would like to offer you, _[NAME]_________, a cash transfer to help you and your family with the burdens of school attendance for the 2009 school year. By accepting this offer, in return for going to school you will be given: You are receiving this money in order to help you return to school or stay in school. In order to receive this money you MUST attend school at least 80% of the days for which your school is in session. Unconditional transfers The Zomba Cash Transfer Program (ZCTP), with funding from the World Bank, would like to offer you, __[NAME]________, a cash transfer to help you and your family. By accepting this offer you will be given: These monthly transfer amounts specified above are given to you as a result of a lottery. You are not required to do anything more to receive this money. You will receive this money for 10 months between February and November, Not for citation without explicit permission from the authors. 24

1. The rules of the program were well understood by the girls in the UCT arm: Not for citation without explicit permission from the authors. 25

2. Girls in the UCT arm knew about the CCT arm: Not for citation without explicit permission from the authors. 26 Int: Earlier you talked of conditional and unconditional. What did you say about the rules for conditional girls? Res: They had to attend class all the time…not missing more than 3 days of classes in a week – like I already explained. Int: How did you say the program managers knew about the missed school days? Res: They would go to the schools…For example, I have a friend, Jane [not real name], who was learning at Samama. They would go each month to the school to monitor her attendance, and if she was absent for more than three days she would not get her monthly money.

SummarySummary of the conditions under which the UCT experiment took place: 1. UCT beneficiaries fully understood their treatment status and were never worried about not receiving their payments due to school attendance. 2. However, the UCT experiment did not happen in a vacuum. It took place in a district where a CCT program was simultaneously running in neighboring communities. Hence, the UCT experiment took place under a rubric of education. Not for citation without explicit permission from the authors. 27