Consumption Smoothing and Frequency of Benefit Payments of Cash Transfer Programs
AbstractWe analyze two noncontributory Mexican pension programs for the elderly. Both paid similar amounts, but one paid monthly while the other paid every two months. The Life Cycle Hypothesis suggests frequency of benefits payments should not affect consumption smoothing, but we find the monthly program was more effective in smoothing food expenditure. It also increased doctor visits and reduced the incidence of hunger spells. Under the bimonthly program, expenditures on food significantly decline between paychecks but ownership of durable goods increased. This suggests the importance of payment frequency in social programs.
CitationAguila, Emma, Arie Kapteyn, and Francisco Perez-Arce. 2017. "Consumption Smoothing and Frequency of Benefit Payments of Cash Transfer Programs." American Economic Review, 107 (5): 430-35. DOI: 10.1257/aer.p20171147
- D12 Consumer Economics: Empirical Analysis
- D15 Intertemporal Household Choice; Life Cycle Models and Saving
- I14 Health and Inequality
- I18 Health: Government Policy; Regulation; Public Health
- I38 Welfare, Well-Being, and Poverty: Government Programs; Provision and Effects of Welfare Programs