Association for Public Policy Analysis & Management

We study whether Honduran children exposed to a conditional cash transfer program from 2000-2005 experience lasting effects on human capital and labor market participation in early adulthood. The government randomly assigned three forms of delivering educational benefits across targeted municipalities: demand (vouchers), supply (school support), and a combination of both. This program provides an opportunity to explore if and how differential exposure to incentives for education produces longer term effects. Using municipal-level panel data, these effects are estimated using difference-in-differences. We find that the form of delivering cash transfers influences the degree to which these programs make progress towards their objective of reducing poverty. Compared to municipalities receiving support from the national Poverty Reduction Strategy, our study indicates that separate exposure to demand or supply-side incentives has no lasting impact. However, joint exposure to both incentives does lead to measurable improvements in schooling and labor market participation, especially for women.