Conditional transfers are key to reduce risky behavior and increase vaccination rates.

Both BI and CT experiments have demonstrated that people who receive transfers tend to behave in ways that improves their well-being, as we demonstrate. More children are educated for longer periods of time. Health improves, partly as a consequence of behaviours such as reducing risky behaviour and increasing vaccination rates. However, neither the BI movement nor the CT movement has developed a very convincing theory about how and why these programs improve well-being.

This essay draws an explicit parallel between BI and CTs, and investigates how these schemes achieve beneficial outcomes. Section 2 examines CT schemes, examining whether it is the condition or the cash which is responsible for beneficial outcomes. Section 3 discusses parallel findings from a Canadian social experiment known as MINCOME, demonstrating that CTs function in remarkably similar ways in high-income countries, to how they do in low- and middle-income countries. Section 4 attempts to explain how CTs work. Of the four theories discussed, three explicitly acknowledge the interdependence of society and are based, in increasingly complex ways, on ideas of social inclusion. Only if we have an understanding of how CTs affect decision-making can we address questions of how best to design CTs. Section 5 acknowledges gaps in our knowledge, and maps a way forward.

2. The Evidence from Conditional and Unconditional Cash Transfers

The two types of CT programs delivered in low- and middle-income countries give us some insight into how these programs are perceived to work by those who propose them. The World Bank, which has offered strong support for CCTs, focuses on "incentives" and incentivizing desired behaviour. The argument is straightforward: if you want someone to behave in a particular way, the incentives must be such that the individual is rewarded for complying. In that spirit, a World Bank website claims:

Conditional cash transfers are an increasingly popular strategy for poverty reduction programs. The idea behind it is simple—money is provided to households that meet specific conditions. In other words, for a household to receive a cash transfer they must undertake certain activities, such as taking children for regular health check-ups and sending them to school [6].

If incentives are the answer to encouraging correct behaviour, the implication seems to be that too little of the desired behaviour would exist without incentives. Yet the incentivized behaviour is, or so the empirical evidence seems to suggest, beneficial to the individuals and families involved. If people need to be incentivized to act in their own best interests, then it must be the case that they behave otherwise largely because they are unaware of their own best interests. Part of the justification for CCTs, then, is to demonstrate the rewards that would accrue to recipients from incentivized behaviour.