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

Conditionality can prevent poor households from receiving cash transfers. Re-analyzing five randomized evaluations of conditional cash transfers, we find: (1) non-compliers — households that do not meet education conditions — are common, representing 4.6% to 37% of eligible households; (2) non-compliers often have lower baseline consumption than compliers; (3) under standard social welfare function assumptions, a budget-neutral switch to unconditional cash transfers can raise the welfare gains from increased consumption by up to 46%, although we find important heterogeneity by context. Our results suggest that conditionality exacerbating consumption inequality can be quantitatively important for the welfare impacts of cash transfer programs.