By Isabel Morales
How do you lift people out of poverty? This is one of the most challenging questions that development economists ask themselves before analyzing factors such as health, education, working conditions, and more. This question is difficult to answer because there is no definitive answer. Economic development is about answering causal questions such as: Will building schools in rural areas increase human capital? There may be a relationship, but it is difficult to establish causality. Another challenge is that some previous development theories have not been effective at improving the state of developing countries (Muller et al., 2019). This uncertainty is still present within development economics, but to a lesser extent due to the adoption of randomized controlled trials (RCTs). RCTs are a tool for more effective policy evaluation and their use grew rapidly in the field of development in the 2000s (Muller et al., 2019). RCTs have recently been used in developing countries to test the effectiveness of programs and policies based on individual needs. One of the first large-scale randomized trials was implemented in Mexico through a program called PROGRESA. Mexico’s case provides an example of how RCTs revolutionized the way poverty is addressed and how they contribute to our understanding of developing countries’ needs.
To understand Mexico’s PROGRESA program, it is important to know what an RCT is and how it works. RCTs are trials or experiments in which the subjects are randomly assigned to one of two groups. The first group is the treatment group which receives the program or policy intervention, and the second one is the control group which is the standard used to make comparisons (Hariton & Locascio, 2018). The importance of randomizing the subjects is that it balances out the characteristics among participants of each group. This way, there are no major differences between the treatment and control groups that can lead to biases and mistaken conclusions regarding the impact of a program (Hariton & Locascio, 2018).
One of the early implementations of RCTs was carried out in Mexico. PROGRESA (Program for Education, Health, and Nutrition), was implemented by the Mexican government in 1997 as a partial response to the economic downturn of 1994 that disproportionately affected Mexico’s poorest citizens (Gantner, 2007). The program sought to replace previous poverty alleviation plans focused on food delivery subsidies that failed to reach poor rural families due to logistical and political reasons. Contrasting with these older programs, the main goal of PROGRESA was to break the intergenerational cycle of poverty in Mexico by slowly developing a healthy and educated population that could contribute to the country’s economic progress. The reasoning behind this is that education and health are considered the most important factors that determine economic conditions (Gantner, 2007). For instance, children who lack nutrients are less likely to be healthy, and as a result, they cannot attend school regularly or effectively learn. A lack of education prevents them from being qualified for better jobs, so they remain in poverty (Gantner, 2007).
Recognizing the importance of these factors for progress within Mexico’s lower classes, the Mexican government decided to send cash transfers so the poor could have access to better education, health, and nutrition. However, to make sure these cash transfers were used for their intended purpose, the transfers were based on a system of conditionality (Gantner, 2007). PROGRESA offered cash transfers to poor families in rural areas only if they sent their children to school and to regular group sessions focused on health and nutrition. The hope was that this money would help families with children who were working instead of attending school because they needed the extra income. Therefore, PROGRESA was a way of getting rid of the barriers that prevent people living in poverty from accessing education and health, while also increasing human capital in Mexico (Gantner, 2007).
The decision to implement PROGRESA started by conducting an RCT with repeated observations collected from 24,000 households in 506 localities and 7 Mexican states. First, researchers planned an experimental design that measured PROGRESA’s impact by “comparing the mean values of key outcome indicators” among poor rural households who were sent cash transfers (treatment group) against very similar households who were not sent cash transfers (control group) (Skoufias, 2005). Then, the researchers collected information from the two groups before and after the implementation of the cash transfer program. During the RCT process, researchers effectively analyzed census data to identify the poorest households who would benefit most from the program. This process made the program less likely to be threatened by political influence and corruption, which had been a problem in the past. Most of the initial findings and results suggested that this plan that combined education, health, and nutrition had a positive impact on the welfare of poor rural families (Skoufias, 2005). As a result, PROGRESA was launched in 1997, initially serving around 300,000 families in 6,344 localities and 12 states (Gantner, 2007).
In the first years of its implementation, PROGRESA was successful in improving conditions for the poor and increasing school enrollment. Early results showed that attendance in secondary schools had increased by more than 20 percent for girls and 10 percent for boys in poor rural households (Gantner, 2007). Children impacted by the program also showed 12 percent lower exposure to illness than children who were not impacted by the program. Food expenditures in PROGRESA households were about 13 percent higher than in regular poor rural households and reflected the consumption of higher-quality foods and more calories (Gantner, 2007). However, PROGRESA failed to address some of its goals. Though school enrollment increased, school performance was not showing improvement. Therefore, the positive impacts of the program on human capital and intergenerational mobility were less than what was desired or expected (Yaschine, 2019). Lower results could be due to challenges afflicting the supply side of education and health systems, such as the need to raise the quality of services. Yet, they also reflect the limitations that several social and economic structural factors can have on well-planned poverty alleviation strategies, which is the case for many developing countries (Yaschine, 2019).
With time, PROGRESA’s name was mostly known as Oportunidades, and it was later changed to Prospera. The basic ideas of the original program remained, but certain components were strengthened (World Bank Group, 2014). In 2019, Prospera was dismantled by President Andres López Obrador, fueling controversy in Mexico (Montes & Pérez, 2021). More than 45 percent of households who received Prospera benefits in 20 of the poorest municipalities of Chiapas—Mexico’s poorest state—claimed they no longer took their children for checkups or got medical attention when sick (Montes & Pérez, 2021). Seven out of 10 also said they limited their protein intake such as chicken due to reductions in cash transfers (Montes & Pérez, 2021).
Though Prospera did not contribute to the country’s welfare in the way it was desired, it still helped poor families in Mexico, and its effects are attributed to helping reduce infant-mortality rates, malnutrition, dropout rates, and teen pregnancies (Montes & Pérez, 2021). Yet, one of the most important facts to keep in mind about RCTs is that what may seem to work in one developing country does not necessarily mean it will work in another. For instance, some researchers have found that conditional cash transfers might increase school enrollment by a larger amount in a country like Malawi, but unconditional cash transfers are better at protecting vulnerable girls by providing them with income even if they drop out of school (Muralidharan, 2017). Therefore, the effectiveness and positive returns of RCTs are highly dependent on the analysis of individual countries’ people, cultures, and specific needs. There is a constant debate between economists over whether RCTs should be used at all, considering there is still uncertainty associated with their results. Though RCTs have several drawbacks, they are worth using in certain cases to analyze possible program benefits in developing regions, which can go a long way in addressing poverty.
Gantner, L. (2007). PROGRESA: An Integrated Approach to Poverty Alleviation in Mexico. Cornell University. https://ecommons.cornell.edu/bitstream/handle/1813/52625/dns_gfs_1200428168.pdf?sequence=2&isAllowed=y
Hariton, E., & Locascio, J. J. (2018). Randomised controlled trials - the gold standard for effectiveness research: Study design: randomised controlled trials. BJOG : an international journal of obstetrics and gynecology, 125(13), 1716. https://doi.org/10.1111/1471-0528.15199
Montes, J., & Pérez, S. (2021, September 3). Mexico’s President Revamps Welfare, Handing Out Cash to Millions. Wall Street Journal. https://www.wsj.com/articles/mexicos-president-revamps-welfare-handing-out-cash-to-millions-11630670402
Muller, S. M., Chelwa, G., & Hoffmann, N. (2019, December 9). How randomised trials became big in development economics. The Conversation. https://theconversation.com/how-randomised-trials-became-big-in-development-economics-128398
Muralidharan, K. (2017). Field Experiments in Education in Developing Countries. University of California San Diego. https://econweb.ucsd.edu/~kamurali/papers/Published_Book_Chapters/FEEDC_2017.pdf
Skoufias, E. (2005). PROGRESA and its impacts on the welfare of rural households in Mexico. International Food Policy Research Institute. https://www.ifpri.org/publication/progresa-and-its-impacts-welfare-rural-households-mexico
World Bank Group. (2014, November 19). A Model from Mexico for the World. World Bank. https://www.worldbank.org/en/news/feature/2014/11/19/un-modelo-de-mexico-para-el-mundo#:%7E:text=Oportunidades%20was%20the%20first%20national,results%20in%20the%20short%20term.
Yaschine, I. (2019, August 6). El Desafortunado Fin de Prospera [The Unfortunate End of Prospera]. Nexos. https://economia.nexos.com.mx/el-desafortunado-fin-de-prospera/