Examining Conditional Cash Transfers in Education Funding

Cash Transfers: Strings or No string?

An analysis of CCT in light of increasing educational attainment

The causality link between education and economic growth and development is undeniable. The economic gains from an improved human capital are immense. Education can help harness the immense potential LDCs have and thus become a global imperative for human development.

Each year the government of developing countries spend about $260 billion on education. Almost all the LDCs provide primary education for free or at a subsidized price. While schooling rates have been increasing globally - of 163 developing countries, 47 have achieved universal primary education - there are still many countries where they remain low (World Bank 2009). The adjusted net enrolment rate (ANER) in primary schools increased by six per cent (from 84 to 90 per cent) between 1999 and 2009 at the global level. In

With an unconditional transfer the budget line shifts the budget line parallel to CE from AB. whereas the conditional cash transfers shifts the line AB to CDA, capping the consumption of “other goods” at A. The cash transfer in here is expected to cover all school-related expenses without investment in education exceeding the amount of transfer.

Richer households, represented by “blue” would be indifferent between the two kinds of transfers as the conditionality does not put the family on a higher indifference curve (I.1.2). however, household “green” would prefer an unconditional cash transfer. A conditional cash transfer would restrict the household to indifference curve I 2.2 and the respective bundle of education and other goods at the corner point. On providing unconditional cash transfer the household would afford to move on to a higher indifference curve (I 2.3). A conditional cash transfer would consequently lower the welfare of household