Paying our way out of poverty

On December 22, 2008, in economics, poverty, by Karen Grepin

Greetings from sunny Aruba. My husband and I are here for the next few weeks enjoying a few days of much needed sun and relaxation. First on the top of his to-do item: exercise like a maniac, first on mine: catch up on all of the reading I have been meaning to do for months and just have not had the mental capacity to tackle. Fortunately, this island appear to be conducive to both goals…and I am already half ways through my first book.

On the list of things I wanted to read more about this break was the current thinking on conditional cash transfer schemes. I have been reading a lot about these “success” stories but had not had the time to sit down and really go through literature. Fortunately, Tina Rosenberg has just published a frighteningly well written piece in the NYTimes magazine, entitled “A Payoff Out of Poverty“, on these schemes, which is great to help me get started.

Rosenberg chronicles the impact a CCT scheme has had on poor families in Mexico – a scheme known as the Oportunidades program. In the scheme, poor households, receive relatively large sums of cash in exchange for ensuring that women attend educational programs, children remain in school, and household members seek preventive care. The program, which has been thoroughly evaluated at ever step of the way, has been shown to have been very successful.

“In 1994, before the peso crisis [and before the scheme], 21.2 percent of Mexicans lived in extreme poverty. In 1996, just after the crash, 37.4 percent did. But that figure had dropped to 13.8 percent by 2006. Mexico’s economic growth during the decade averaged an unspectacular 3 percent, which would not by itself have produced such gains for the poor. And these statistics underestimate the program’s true influence, as its greatest effects were concentrated on the very poorest.”

The articles goes on to explore whether or not such a scheme, which have now been implemented in dozens of developing countries, could also be successful in the United States. While it is too soon to tell whether this program will work in a city like NYC, where it is currently being evaluated, the early results seem promising. How far might we be able to go with these schemes?

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