Does Money Matter? The Effects of Cash Transfers on Child Health and Development in Rural Ecuador

Abstract:   This paper examines how a government-run cash transfer program targeted to poor mothers in rural Ecuador influenced the health and development of their children. This program is of particular interest because, unlike other transfer programs that have been implemented recently in Latin America, receipt of the cash transfers was not conditioned on specific parental actions, such as taking children to health clinics or sending them to school. This feature of the program makes it possible to assess whether conditionality is necessary for programs to have beneficial effects on children. Random assignment at the parish level is used to identify the program’s effects. We find that the cash transfer program had positive effects on the physical, cognitive, and socio-emotional development of children, and the treatment effects were substantially larger for the poorer children than for less poor children. Among the poorest children in our sample, children whose mothers were eligible for transfers had outcomes that were on average more than 20 percent of a standard deviation higher than those for comparable children in the control group. Treatment effects are somewhat larger for girls and for children with more highly- educated mothers. We examine three mechanisms—better nutrition, greater use of health care, and better parenting—through which the transfers might influence child development. The program appeared to improve children’s nutrition and increased the chance they were treated for helminth infections. However, children in the treatment group were not more likely to visit health clinics for growth monitoring, and the mental health and parenting of their mothers did not improve.