Do CCT Programmes Have a Pro - Poor Spillover Effect ?

Conditional Cash Transfer programmes (CCTs), such as Progresa in Mexico or Bolsa Família in Brazil, have been compared to a " magic golden bullet in development ". A plethora of rigorous evaluations of such programmes points to a significant increase in food consumption among cash-recipient households. A topic that has not received much attention yet is the impact of cash transfer programmes on the food consumption of households that do not receive the transfer (programme-ineligible households) but that are in the same village as cash recipients. Why should we care about programme-ineligible households? In many cases, funding for a CCT is limited. Hence governments and non-governmental organisations often allocate transfers to the most vulnerable groups of a population. But the vast majority of those deemed ineligible for the programme are far from what we would consider " well-off ". For example, the monetary value of ineligibles' daily per capita food consumption in Mexico's Progresa was less than US$1.0 when the programme started in 1997. Poverty therefore persists even among ineligible households. If a CCT has a positive food consumption spillover on ineligible households, the overall impact on poverty is much greater than previously recorded. Why would programme-ineligible households increase their food consumption, even though they do not receive the cash transfer? First, transfers increase the recipient households' demand for goods and services. This in turn changes prices and labour demand in the community. If a programme-ineligible individual is a labourer, the increase in demand for goods and services leads to more employment opportunities, and thus additional income. If programme-ineligible households are engaged in small business activities they benefit from increasing prices (higher profits). Second, the liquidity induced by a CCT improves credit markets (Angelucci and De Giorgi, 2009). The consequent increase in access to loans can be used to scale-up domestic agriculture, livestock production and other small business activities. Third, a CCT may lead to increases in informal food gifts from programme participants to programme-ineligible households. In the anthropology literature, this phenomenon is often referred to as " solidarity ". The economic literature emphasises the importance of in-kind sharing as a means of informal insurance against shocks (illness, crop failures and so on). Households have an incentive to share food with other households in order to receive help when they themselves fall into precarious situations (the principle of " reciprocity "). These and other important channels through which a CCT …