an Eldis Resource

This paper examines whether or not shocks adversely affect child schooling and labour choices, and to what extent Conditional Cash Transfer (CCT) programmes can help mitigate these effects. In particular, the paper analyses the effects of shocks on education and child labour outcomes using data from the Progresa programme in Mexico.

The findings from the study show that:

• strong state dependence indicates that children taken out of school (partly due to shocks) are less likely to subsequently return. The CCT programme seems to mitigate this state dependence
• a number of shocks such as unemployment or illness of the household head or younger children, natural disasters, loss of land, harvest, or animals, have strong effects on children's schooling attainment, indicating that that children are used as risk coping instruments. The Progresa transfers compensate for these shocks, protecting child schooling
• while the shocks reported also seem to induce children to work, particularly girls and children of farm workers when their parents are affected by unemployment, Progresa transfers and the conditionality on school attendance serve to deter using child labour as a risk coping strategy

Policy recommendations include:

• incorporating risk exposure and shock incidence criteria in the design of such programmes’ eligibility rules, or allowing additional flexibility in terms of scaling up or down such interventions to address large covariate or idiosyncratic shocks is a potentially worthwhile direction and use of such programs
• CCT programs could be expanded to enrol non-beneficiaries by linking eligibility with shocks. In the case of Progresa, inclusion could automatically follow covariate shocks
• idiosyncratic shocks could be easily verifiable through community participation, even if after some delay. Since households will be informed that if they are affected by a particular shock they will be eligible to enter the programme, they will effectively be partially insured against the shock, allowing them to reduce risk management and increase expected income
• extend conditionalities to include risk management related rules that enable households to better prevent or mitigate the impact of shocks before they occur. Risk-specific conditionality rules could have a more direct impact in insuring that households take actions to reduce the risk of being affected by a specific shock or minimise its impact.

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