Do conditional cash transfers in childhood increase economic resilience in adulthood? Evidence from the COVID-19 pandemic shock in Ecuador

Abstract

The primary goal of conditional cash transfers (CCTs) is to alleviate short-term poverty while preventing the intergenerational transmission of deprivation by promoting the accumulation of human capital among children. Although a substantial body of research has evaluated the short-run impacts of CCTs, studies on their long-term effects are relatively scarce, and evidence regarding their influence on resilience to future economic shocks is limited. As human capital accumulation is expected to enhance individuals' ability to cope with risk and uncertainty during turbulent periods, we investigate whether receiving a conditional cash transfer -- specifically, the Human Development Grant (HDG) in Ecuador -- during childhood improves the capacity to respond to unforeseen exogenous economic shocks in adulthood, such as the COVID-19 pandemic. Using a regression discontinuity design (RDD) and leveraging merged administrative data, we do not find an overall effect of the HDG on the target population. Nevertheless, we present evidence that individuals who were eligible for the programme and lived in rural areas (where previous works have found the largest effects in terms of on short-term impact) during their childhood, approximately 12 years before the pandemic, exhibited greater economic resilience to the pandemic. In particular, eligibility increased the likelihood of remaining employed in the formal sector during some of the most challenging phases of the COVID-19 crisis. The likely drivers of these results are the weak conditionality of the HDG and demand factors given the limited ability of the formal economy to absorb labour, even if more educated.