Disbursement Timing Liquidity Incentives
RCTReview
Low-income families frequently face severe credit constraints during critical academic transitions, causing high dropout rates even when periodic education subsidies are offered.
Picture this
Imagine a family saving money for a child's college application fees. Small weekly allowances get consumed by daily expenses like groceries, but receiving a single larger check right when tuition is due ensures the cash is available to pay the bill.
What the evidence says
Standard periodic attendance subsidies increased secondary school attendance by 2 to 4 percentage points, whereas lump-sum payments timed at matriculation deadlines increased tertiary education attendance by over 9 percentage points.
- Who was studied
- Human secondary school students in low-income urban households in Colombia.
- How
- Randomized controlled trial comparing periodic attendance subsidies with lump-sum disbursements scheduled at key educational enrollment deadlines.
What to do
Schedule conditional education transfers as lump-sum disbursements aligned with school enrollment fee deadlines to overcome household liquidity constraints.
From the source
"One of the treatments provided families with a lump-sum payment about the time that fees were due for the next school year and another provided a lump-sum payment at the start of tertiary schooling. These lump-sum payments increased college attendance by over 9 percentage points."
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