Abstract:

This paper estimates the impact of the conditional cash transfer program, Red de oprtunidades, on school enrollment and child labor in Panama. The analysis relies on data from the Living Standards Measurement Survey of 2008. It uses a propensity score matching technique to identify the impact of the program in rural and indigenous areas of the country by replicating the selection criteria followed by the government to identify potential beneficiaries of the program. Our results show that the program increased school enrollment in rural and indigenous areas and was able to reduce child labor only in rural areas. A further analysis by education level (elementary, middle, and high school) shows that, in rural areas, the effect of the program is limited to middle school enrollment: participation in the program increases enrollment by 7% over children that do not participate in the program (there is no difference on elementary school and high school enrollment between children participating and children no participating in the program). Results found over child labor support this conclusion: specifically, the program reduces child labor through a decline in work in children ages 12 to 15 in rural areas (which corresponds to the ages of children attending middle school). In indigenous areas the program increases enrollment only in elementary school by approximately 9.3%. We found no evidence of positive effects of the program over child labor in indigenous areas. This suggests indigenous children start working when they leave elementary school and the program has not been able to reverse this trend.

Keywords:

Impact Evaluation, Conditional Cash Transfer.