Lighten the Burden: Assessing the Impact of a for-Poor-Students Cash Transfer Program on Spending Behaviour

Abstract

The Indonesian Government launched a for-poor students cash transfer program (Bantuan Siswa Miskin, BSM) to aid poor students in attaining goods and services that would improve school attendance. Recipients should spend the cash to support school attendance, however, the government does not have any control on how households spend the transfer. Using the Indonesian Family Life Survey, we evaluate whether the BSM program affects education spending. To deal with the issues of endogeneity and unobserved heterogeneity, we use the BSM eligibility criteria set by the government as instrumental variables and the first-difference estimation strategy. We find that BSM has a significant and positive effect on education spending. This study provides evidence that households use the transfer according to the intended purpose even though there is no formal mechanism to ensure households’ compliance.