Effects of Poverty Alleviation on Labor Supply and School Attendance: Evidence from the IDT Program in Indonesia

Chikako Yamauchi, University of California, Los Angeles

A growing concern among developing countries that certain regions fall behind in economic growth has led many of the governments to initiate public transfer programs targeted to poor areas. I investigate causal effects of a targeted transfer program on the welfare of the poor by exploiting a unique feature of an Indonesian program called IDT, which aims to increase employment and improve welfare. The fact that this program provides the same amount of financial aid to all the selected villages regardless of their population size creates a variation in grant intensity across villages. Utilizing this variation together with an explicit grant placement rule, I show that self-employed male adults as well as older children increase their hours of work, but school attendance of the children is not affected. I also examine whether the villages with better administrative capability and more educated residents disproportionately benefit from the program.