Conditioning Out the Poor? Consumption Inequality and the Design of Cash Transfer Programs

Conditionality can exclude poor households from receiving transfers. Reanalyzing five randomized evaluations of conditional cash transfers (CCTs), we find that 9–37% of eligible recipients fail to meet conditions, and they typically have lower baseline consumption. We assess the welfare implications of budget-neutral shifts from CCTs to unconditional cash transfers. Conditionality exacerbating inequality among eligible recipients can be quantitatively important for welfare impacts. We quantify how large conditionality-induced human capital gains must be for the welfare benefits of CCTs to outweigh the inequality costs generated by conditionality.