New research traces the intricate links between policy and politics

INCENTIVES ARE central to welfare systems. In developing countries some “conditional cash-transfer” programmes offer families on low incomes benefits only if the children are sent to school and vaccinated. Payments may be suspended if they do not meet the conditions, but relatively little is known about how recipients respond. A trio of papers written by Fernanda Brollo of the University of Warwick, Katja Kaufmann of Mannheim University and Eliana La Ferrara of Bocconi University, and presented at the annual conference of the Royal Economic Society last month, examine the far-reaching spillovers of enforcing conditionality.

The authors analyse the behaviour of recipients of the world’s largest conditional cash-transfer scheme, Bolsa Família (Family Grant), which covers 14m poor households in Brazil, or roughly a third of the country’s population. Its budget amounts to 30bn reais ($7.5bn)—0.4% of GDP. In order for a family to receive the benefit, the children must attend school for at least 85% of days in a month. Parents whose children play truant first receive a warning; further absences eventually lead to payments being suspended.

The papers find that such penalties have wide-ranging effects. They encourage compliance not only by the family that is directly affected, but also by their neighbours, and by the families...

via The Economist: Finance and economics Business Feeds

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