Beyond Cash: Assessing Externality and Behaviour Effects of Non-Experimental Cash Transfers

This paper examines externality effects in cash transfer programs. It measures externality through the decomposition of the average treatment effect on the treated into participation effect and externality effect. The paper suggests a nonparametric decomposition to investigate whether changes in household outcomes are caused by the income transfer itself or by non-monetary components of the program, such as conditionalities and family support services.

The paper applies these decompositions on the effect of a conditional cash transfer (CCT) program on household consumption and savings in Paraguay. It compares two groups, one within the village and potentially exposed to the externality, and another in a different village not affected by the program. The evaluation survey examines information on both income and consumption. Results indicate that:

• Program has a small impact on consumption and a considerable impact on savings;
• Program would have a higher effect on consumption and a lower effect on savings in the absence of externality;
• Impact on consumption pattern is significantly related to a substitution effect and is not related to the increase in income.