The long-term impact of (un)conditional cash transfers on labour market outcomes in Ecuador

TL;DR

This study assesses the long-term effects of Ecuador's Human Development Grant, a cash transfer program, on children's formal labor market participation, revealing significant positive impacts nearly 15 years later.

Contribution

It provides rare long-term evidence on unconditional cash transfers' effects on labor outcomes, using a regression discontinuity design in Ecuador.

Findings

13% increase in formal employment probability after 15 years

Positive impact likely through human capital development

Supports policy for long-term poverty reduction

Abstract

Despite the widespread implementation of conditional cash transfers in low- and middle-income countries, evidence on their long-term effects remains limited. This paper evaluates the impact of Ecuador's Human Development Grant on the formal labour market outcomes of children from eligible households. The programme, one of the first of its kind, was characterised by weak enforcement of its eligibility criteria. Using a regression discontinuity design, we find that the grant increased the probability of working in the formal sector by almost 13\% around 15 years after exposure, thereby helping to curb the intergenerational transmission of poverty. This positive effect is most likely to operate through human capital accumulation.