Conditional Cash Transfers : Do They Change Time Preferences and Educational Aspirations?

Conditional Cash Transfer programs are designed to increase human capital in poorer families. They do this directly through incentives and conditions. A further way in which these programs may influence household decisions is through impacts on preferences. Preferences may change as a result of habits formed during program participation, the information received as part of the program and/or by the relaxation of the budget constraint which gives households a greater ability to look beyond daily needs and plan for the future. Using a regression discontinuity design we test whether a large conditional cash transfer program in Colombia affects the time preferences of participating households and their aspirations for their children's education. We find that it does not. There is no significant difference between current and past participating households' preferences and educational aspirations and those of otherwise similar non-participating households. Thus, the positive educational impacts identified in previous studies appear to be driven by the ongoing receipt of the cash transfers and the associated conditions. Hence if the transfers were to stop, program benefits would be limited to those associated with the educational and health improvements that were obtained during the program's implementation. The health and education of subsequent children would likely revert to pre-program levels