General Background Conditional cash transfer (CCT) programs aim to reduce poverty by making welfare programs conditional upon

the receivers' actions. It is a transfer of cash from the government to the selected target who are usually the poorest of the poor. The government only transfers the money to persons who meet certain criteria. These criteria may include enrolling children into public schools, getting regular check-ups at the doctor's office, receiving vaccinations, or the like. CCT has the two main objectives of reducing current poverty through the cash transfers and to reduce poverty in the long run through improvement in the human capital. CCT started in the Latin American region, particularly in Brazil (Bolsa Escola) which was then adapted by other countries. There was a noticeable increase in the numbers of countries who adapt the CCT in their country as a policy to address the problem of poverty. CCT was seen as an attractive policy that replaced other programs that were proven to be ineffective in targetting and addressing the problem of poverty.Several studies done by ADB and WB showed that CCT indeed have shown positive results. CCTs are a hybrid sort of contract between the government and the beneficiary. CCT introduces a concept of co-responsibility since to be able to continue on receiving the benefits in the CCT program, beneficiaries must meet certain conditions every month. Emphasis on coresponsibilities was a main point of CCT that sets it apart from just directly giving cash to the poor families. Economics behind the pros and cons of CCT Pros CCT is a mechanism that redistrbutes wealth from the rich to the poor. If properly targeted, the CCT could increase the income of the poor people in the country. Increase in income would result to a change in consumption pattern of the poor households, specifically, income effect. It induces income effect since it shifts the budget line of the poor households further, which enable them to consume more goods without necessarily distorting the relative prices of the goods. Poor households enjoy higher utility since they are able to consume more, and get to a higher indifference curve. It is efficient since it only induce income effect. CCT gives the parents a higher incentive to invest in the health and education of their children since it is stated in the conditions of CCT. Non-compliance to the requirements would lead to the termination of the monthly stipend that they receive. Through those conditions, it ensures that there would be investments in human capital which would result to a increase in productivity and income in the long run. CCT promotes efficiency since generally, in-cash assistance is prefered to in-kind assistance. Incash assistance provides the recipients enough flexibility to where they want to spend their

resources. Moreover, in-cash assistance does not distort prices since it wont affect relative prices of certain goods. Since it does not affect relative prices, CCT induces income effect alone. Inefficiencies brought by substitution effects in in-kind transfers were avoided. CCT is also a way of pressuring the local government units to improve the social services in their province. It gives incentives to politicians to improve the social services in their area to maintain their good image CCT is also a way of empowering the poor consumers since it is mainly concentrated on the demand side. Most of the existing projects that aims to help the poor are concentrated on the supply side. By focusing on the demand side, the cost of administrating the project was greatlt reduced since the beneficiaries will get the benefits directly, the government does not have to go through other administrative procedures such as procurement, transactions cost was reduced, and leakages were minimized, especially since the advent of ATM. Cons Most critics of the CCT says that it was a dole-out project that gives incentives to people to work less. They say that CCT is a band aid solution to poverty since it does not really address the root of poverty. Instead, it only gives a short run solution. Also, cash is a very liquid asset. Since selected families would be given cash, they have tendencies to spend it to useless things like alcohol, cigarettes, etc. One strong argument against CCT is the absence or scarcity of supply of social services. For instance, a selected family in a far-flung area might find it hard to comply with the required number of school attendance and number of check-ups if there is no school or health center in their barrio. Some argues that money spent on CCT should instead be directed towards improving the social services in our country. Another argument against CCT is the kind of targeting system that the governmetn will use. There are debates on how effective is the targeting system in selecting the poorest of the poor. Can it reach as far as the mountain regions? Can it assure that those who are selected are the ones who really needed it the most? Pantawid Pamilyang Pilipino Program