Do School Subsidies Promote Human Capital Investment among the Poor?

Cesar Martinelli, Instituto Tecnológico Autónoma de México
Susan Parker, Centro de Investigación y Docencia Económicas (CIDE)

We investigate the hypothesis that conditioning transfers to poor families on school attendance leads to a reallocation of resources enhancing the human capital of the next generation, via the effect of the conditionality on the shadow price of human capital. We estimate the price effect of conditional transfers to mothers on intra-household allocations using data from a social program in Mexico, and show that price effects are large and significant. The estimates suggest that household resources beyond those directly subject to conditionality have been reallocated favorably to children's human capital investment.