CCTs, Performance Pay and Complementarities: Enhancing the Impact of CCTs on Learning

Abstract

Conditional cash transfer (CCT) programs have been implemented in several countries around the world as a tool for building human capital. There is significant evidence to suggest that CCTs have helped get more children into school. However, CCTs have also been shown to be only minimally effective on improving learning outcomes for these children. To improve the effectiveness of the CCT program, therefore, requires a supply-side intervention that targets school quality. Hanushek and Rivkin (2005) have found teacher quality to be one of the strongest supply-side determinants of student achievement. Given these considerations, I recommend pairing CCT programs with a teacher pay-for-performance (P4P) program. I argue throughout this paper that such a two-pronged policy approach will form complementarities that ultimately enhance the effectiveness of CCT programs and improve learning outcomes. I present evidence, moreover, from impact evaluations on P4P programs to suggest that by inducing teacher effort, P4Ps would increase learning for CCT participants. Using the case studies of Brazil and Chile, I suggest that a complementary teacher pay-for-performance program can increase the efficiency of conditional cash transfer programs in contexts where nationally, on average, there is low teacher quality and low teacher-pay. Limitations of this research are rooted in the inability to perform an experiment that combines CCTs and P4Ps, but nonetheless, this study contributes to literature on how to improve an educational intervention that has become increasingly popular over the past 24 years.