Abstract
This paper investigates the hypothesis that birth order in developing countries affects children's educational outcomes due to liquidity constraints by studying a cash transfer program implemented in rural Nicaragua. This program offers two types of cash transfers, one is unconditional on and the other is conditional on school attendance. I test this hypothesis by estimating the impact of the unconditional cash transfers on birth order effect and that of the conditional cash transfers for comparison. My findings show the cash transfers unconditional on school attendance do not affect the initial birth order effect, which implies that the hypothesis is unlikely to hold in this context. The cash transfers conditional on school attendance reinforce the initial birth order effect so that the gap between the first born children and the second or later born children is widened after the interventions.
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