Income Transfers, Marital Dissolution and Intra-Household Resource Allocation: Evidence from Rural Mexico

A growing number of countries have introduced transfer programs in which funds are specifically targeted to mothers. Alternative economic models of the family suggest that such programs may or may not affect the spending patterns of families that remain intact. Some models also suggest that providing income to mothers may lead to an increase in family dissolution. I use data from the experimental evaluation of the Progresa program in Mexico to provide new evidence on the effects of targeted transfers on marital dissolution and intra-familial spending decisions. Families that were eligible for the transfer experienced a significant increase in separation rates, with most of the effect concentrated among indigenous households. The absolute size of the effect is modest (0.7 percentage points), but large relative to the underlying separation rate in the control group. To evaluate the effects on spending decisions of the families, I combine the randomized variation generated by the evaluation with income variation attributable to localized rainfall shocks. Using these two variables as instruments for the overall level of family spending and the amount of outside income received by the mother, I find strong evidence against the hypothesis of strict income-pooling, particularly among indigenous households. A review of both quantitative and qualitative evidence suggests that social norms and property rights that favor women in indigenous communities may help explain the observed differences. The results suggest that targeting transfers to mothers leads to a significant rise in the fraction of the income spent on clearly identifiable children’s goods. ______________________ * Special thanks to David Card, Ken Chay, Ronald Lee, and Ted Miguel for guidance on this paper. I also thank Josefina Carpena-Méndez, Julian di Giovanni, Paul Gertler, Melissa González-Brenes, Chang-Tai Hsieh, Michael Hout, Ethan Ligon, Sebastián Martinez, Enrico Moretti, and participants at NEUDC 2004 and the Latin American Studies Association 2004 Conference for helpful comments. The usual disclaimer applies. Contact: Gustavo J. Bobonis, Ph.D. Candidate, Department of Economics, 549 Evans Hall #3880, University of California at Berkeley, CA 94720-3880, USA; phone: 1-415-643-5394; [email protected]