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2013-03-09 | Peer Reviewed

Conditional Cash Transfers and Payments for Environmental Services - A Conceptual Framework for Explaining and Judging Differences in Outcomes

Persson, Martin and Francisco Alpízar. 2013. “Conditional Cash Transfers and Payments for Environmental Services—A Conceptual Framework for Explaining and Judging Differences in Outcomes.” World Development 43: 124-137.
Download reference Doi:10.1016/j.worlddev.2012.10.006

The objective of this paper is to explore the determinants of additionality of CCT and PES schemes, defined as the programs’ capacity to deliver desired outcomes that would not have occurred in their absence.

Despite the recent popularity of conditional cash transfers (CCT) and payments for environmental services (PES) programs, what determines their success is not well understood. We developed a conceptual framework to give insight into some of the main determinants of CCT and PES program efficiency that hope to increase investments in human and environmental capital. We used a simple agent-based model and validated the results with empirical data from existing programs. We show that 1) the share of participants who meet the program’s conditions at baseline is a powerful predictor of program efficiency, (2) and selection bias erodes program efficiency to a large extent. (Selection bias stems from agents who already meet program criteria and who self-select into programs at higher rates than those who do not meet the conditions.) Based on these results, we discuss possibilities for improving efficiency—mainly by targeting applicants or increasing payments—and criteria for evaluating and choosing CCT, PES, or other policy instruments.