Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/33364 
Year of Publication: 
2006
Series/Report no.: 
IZA Discussion Papers No. 1955
Publisher: 
Institute for the Study of Labor (IZA), Bonn
Abstract: 
Aid programs in developing countries are likely to affect all households living in the treated areas, both eligible and non-eligible ones. Studies that focus on the treatment effect on the treated may fail to capture important spillover effects. We exploit the unique design of an aid program's experimental trial to identify its indirect effect on consumption for non-eligible households living in treated areas. We find that this effect is positive, and that it occurs through changes in the insurance and credit markets: non-eligible households receive more transfers, and borrow more when hit by a negative idiosyncratic shock, because of the program liquidity injection, thus they can reduce their precautionary savings. We also test for general equilibrium effects in the local labor and goods markets, finding no significant changes in labor income and prices, while there is a reduction in earnings from sales of agricultural products, which are now consumed. We show that this class of aid programs has important positive externalities, thus their overall effect is larger than the effect on the treated. Our results confirm that a key identifying assumption - that the treatment has no effect on the non-treated - is likely to be violated in similar policy designs.
Subjects: 
program evaluation
consumption
Progresa
JEL: 
E21
H43
I38
O12
O17
Document Type: 
Working Paper

Files in This Item:
File
Size
391.27 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.