Targeting efficiency and take-up of opportunidades, A targeted conditional cash transfer in urban areas in Mexico

Robles Aguilar, Gisela (2012). "Targeting efficiency and take-up of opportunidades, A targeted conditional cash transfer in urban areas in Mexico" Paper presented at the 9th annual conference of the HDCA, 5-7 September 2012, Jakarta, Indonesia.

Oportunidades aims to prevent the intergenerational transmission of poverty by enhancing the accumulation of human capital and providing a periodical and conditional cash transfer to poor families in Mexico. It selects its beneficiaries by means-testing targeting but complex criteria for targeting and data limitations challenge the efficiency of this targeting instrument. Participation of the target population cannot be taken for granted and low take-up rates of Oportunidades in urban areas are a cause of concern. The cost of attaining information and being aware about the programme and the cost of conditionality related to school attendance have been considered by previous research as factors that explain why Oportunidades is less attractive in urban areas than in rural ones. Conditionality related to health and psychological costs have been less frequently incorporated in this kind of analysis. This research uses a two-step selection model and latent variable methodology to explore the costs faced by Oportunidades’ eligible population in urban areas. This research explores how characteristics of individuals and the neighborhoods in which they live condition the presence of psychological and administrative costs. Methodologically, neighborhood characteristics proved to be a valid instrument for identification of the models. Moreover, the interaction between individual and neighborhood characteristics provides a better understanding of the mechanisms through which psychological and administrative costs discourage participation in Oportunidades. This research shows firstly that means-tests are not the basis for allocating benefits among the population and that conditionality of the cash transfer plays an important role in determining take up. Takers are to comply with conditionality of basic education, but their neighbors do not necessarily attend to school at primary level, which speaks to the importance of conditionality as an outcome of the programme. Yet, this conclusion does not hold for secondary level, at which takers and neighbors are both likely to attend secondary education. With regards to health, households who face excessive monetary costs to attend health centres are less likely to get the cash transfer, and neighborhoods who suffer more stigmatizing treatment in health centres where households are less likely to get the cash transfer. Therefore, barriers to health assistance are negatively and significantly related to cash transfer receipt of eligible households in urban areas. Evidence is consistent with the hypothesis that eligible households choose to take up the cash transfer if benefits are higher than costs. This research portrays conditionality compliance and psychological costs as the main barriers to access to Oportunidades. Allocation of cash transfers is modeled as a two-step mechanism, with an initial stage in which eligible households are selected. In a second stage, the probability of getting the cash transfer conditional on being an eligible household is estimated. Therefore, the first stage refers to the means-test targeting 2 mechanism while the second stage considers conditionality, barriers to health care and psychological costs as determinants of take up of cash transfer conditional on being eligible to the programme. A second model portrays the residual of the take up model as latent ‘unobserved’ take-up cost. The distribution of this cost shows that households that are further away from the poverty line, households with children that earn income and households that experience monetary and stigmatizing barriers to health care are the ones who face the highest takeup costs. This research concludes that arrangements in administration and implementation of the programme determine the feasibility of targeting design. This research also draws conclusions on different reforms that could enhance take-up rates, as well as on the pertinence of means-testing targeting and a tool for allocation of cash transfers and public services.

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