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Heba Gowayed

Research Findings

The problem with behavioral incentives

May 21, 2018

Behavioral incentive programs have become a popular policy tool for combating poverty. The premise of these policies is simple: pay the poor to behave “optimally,” thereby improving their outcomes.

The catch, however, is that the behavior of the poor is a symptom, not a cause, of their poverty.

In 2008, the Egyptian government, responding to a gap in child school access, launched a program drawing from a model used in many countries around the world, a Conditional Cash Transfer (CCT). This program, like other CCTs, gave cash to low-income mothers, who are primary caregivers, in exchange for sending their children to school.

In a recently published study, I showed that while the mothers did send their children to school as a result of the program, the premise of the behavioral incentives was wrong.

The mothers in the Cairo neighborhood I studied did value education, so much so that they struggled, through debt and odd jobs, to cobble together the monthly fees demanded by teachers. Teachers, underpaid due to decades of declining public-sector spending, pushed by the International Monetary Fund (IMF) and the World Bank, kicked students out of classrooms if they did not pay “study group” fees.

The cash from the CCT was a godsend for families, but the conditions were superfluous. The result was that the program subsidized the state’s failure to provide a basic service.

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