Spillover effects in adoption of cash transfer programs by Latin American countries

Abstract

Some of the most effective public programs used in Latin America to reduce poverty and inequality have been non-contributory cash transfers. We examine country-specific characteristics that lead countries to adopt these programs over time using a state-transition spatial probit panel data model that takes into account dependence between countries’ decision to adopt these programs. Intuitively, past adoption of cash transfer programs by other countries might have an impact on the probability that a country implements this type of program. We explore alternative connectivity structures to model dependence, spatial proximity as well as connections based on population migration flows, finding out-migration as most consistent with our sample data and spatial regression specification. For our panel of 17 Latin American countries over the period 2000–2017, we find evidence of dependence between countries in the probability of adoption of conditional cash transfer programs, but no such evidence in the case of unconditional cash transfer programs.