The Household's Decision to Accept or Reject a Conditional Transfer Offer

Abstract

Households deemed by society to have insufficient resources to purchase an adequate commodity bundle are often offered aid (i.e., additional resources) conditional upon the households' purchasing a given level of some commodity (e.g., food, fuel, or housing). Such conditional transfers attempt to modify the households' normal behavior, i.e., if the households would normally purchase the required level of the designated commodity upon receipt of the transfer, the constraint would not be necessary. How these incentives and constraints interact to affect the households' behavior determines in large part the number and type of eligibles aided by the program, aggregate program costs (given payment levels), and the types of commodity bundles purchased by the recipient households. Clearly, understanding the decision to accept or reject a conditional transfer offer has widespread implications for the costs of the transfer program, the impact on eligible households, and the attainment of society's objectives. Numerous studies have investigated the size and distribution of recipient benefits in conditional transfer programs [1; 3; 6; 8; 9; 14; 16; 21]. To this author's knowledge, however, no analysis has estimated a model of the household's decision to participate in a conditional transfer program using household data and a theoretically appropriate measure for the household's net gain.' To overcome this gap in our understanding of the household's