Teenage School Attendance and Cash Transfers: An Impact Evaluation of PANES

Three years after a severe economic crisis, the Uruguayan government launched a temporary antipoverty plan, the National Plan for Social Emergency Assistance (PANES), which took place from April 2005 to December 2007, lasting for thirty-four months. This program included a cash transfer component, Citizen Income, which was, in fact, the main intervention of the plan. In the short run, the primary objective of this intervention was to provide cash assistance to indigent households. In the long run, it aimed at promoting social integration in many ways, such as carrying out educational and labor interventions for adults, encouraging households to foster child schooling, and promoting health checks. To pursue this objective, in the original design, program participation was conditional on school enrollment for those households with children and health checks for all beneficiaries. However, in practice, conditionalities were not controlled, owing to lack of administrative coordination among the involved institutions. Although promoting schooling was not the main objective of the plan, the cash transfer might have affected school attendance and child labor through a direct income effect and also through the influence of the announced conditionalities.

The provision of conditional cash transfers as a means to break the intergenerational transmission of poverty has entailed a redesign of Latin American social protection systems over the past two decades. The abundant literature on impact evaluations of conditional cash transfers indicates that many programs have successfully increased child schooling, particularly in the age group six to thirteen, and, in some cases, have reduced child labor, with no major undesirable effects on adult labor supply (ECLAC 2006; Fiszbein and Schady 2009; Bouillon and Tejerina 2007; Saavedra and García 2012). Yet the design and implementation of these programs varies a great deal across different instances, and baseline situations also differ across countries. According to the existing literature, baseline enrollment rates, design issues (such as payments scheme and timing, type of conditionalities), complementary supply-side interventions, and the generosity of the transfer are strongly associated with the magnitude of the effects on schooling (Fiszbein and Schady 2009; Bouillon and Tejerina 2007; Saavedra and García 2012).

This paper seeks to contribute to the accumulating literature about the impacts of cash transfers on teenage schooling and labor by providing evidence from a middle-income country in which the initial enrollment rates were above the average of the countries where these programs have been previously launched. We analyze program effects on school attendance and child labor for children aged fourteen to seventeen. This group concentrates the main problems of the Uruguayan educational system, as it exhibits persistently high drop-out rates. Owing to this circumstance, it is important to find out to what extent cash transfers can contribute to overcome this problem. We also explore the role of some of the potential channels highlighted in the cash transfer literature: household income, adult labor supply and labor income, and conditionalities.

This evaluation is based on two data sets: the official administrative records from PANES applicants (baseline data) and two waves of a follow-up survey that was specifically designed to carry out the impact evaluation of the program, the first gathered eighteen months after the program started, and the second two months after the program ended.

We provide evidence using two identification strategies: a regression discontinuity design (RDD) using separately the data from each wave of the evaluation survey, and a difference-in-differences (DD) approach that exploits the longitudinal nature of the collected data. The questionnaire from the first wave of the follow-up survey allows us to partially explore the role of conditionalities.

Cash Transfers, Child Labor, and School Attendance: Previous Findings

The Determinants of Child Labor and School Attendance

Traditionally, the economic literature has considered school attendance and child labor as a single decision in developing countries (Cardoso and Verner 2007; Nielsen 1998). In our framework, which considers schooling and labor as alternatives, human capital theory identifies two main reasons why children leave school to start working. One is that net returns for human capital investments are...