Conditional Cash Transfers and School Dropout Rates

This paper evaluates a United Kingdom pilot study designed to test whether a means-tested conditional cash transfer paid to 16- to 18-year-olds for staying in full-time education is an effective way of reducing the proportion of school dropouts. The transfer's impact is substantial: In the first year, full-time education participation rates increase by around 4.5 percentage points while the proportion receiving two years of education increases by around 6. 7 percentage points. Those receiving the full payment have the largest initial increase in participation and some evidence is found suggesting that part of the effect can be explained by liquidity constraints.