Wealth Inequality and Conditionality in Cash Transfers : A Politico-Economic Approach

We present a model that offers an explanation whether a condition is attached to cash transfers affects the elimination of child labor, taking into account wealth heterogeneity (especially land). The cash transfer program designs (conditional vs. unconditional) is determined through a political process. We show that when wealth distribution is left-skewed, median voters support conditional cash transfers, which reduces child labor. Unconditional cash transfers enjoy political support when the wealth distribution is less skewed; however, child labor remains. Our cross-country estimation confirms that countries with a greater wealth inequality are adopted conditional cash transfer in a number of developing and transition economies. The effects of sibling differences on child labor and cash transfer programs are also examined