Growing Up Over the Social Safety Net: The Effects of a Cash Transfer Program on the Transition to Adulthood

This paper presents novel evidence about the effects of a permanent, large-scale, and government-implemented cash transfer program, the Uruguayan PANES/AFAM-PE. I focus on three critical dimensions of individuals’ transition to adulthood: education, fertility, and labor market decisions. I use a unique combination of individual-level administrative records jointly with a Regression Discontinuity Design that exploits the use of a poverty score to define eligibility to participate in the program to describe the trajectory of the effects exhaustively. The main findings can be grouped into three. First, the program leads to a 2.2-year delay in the age at which women have their first child, explained by a substantial reduction in teenage fertility. Second, the program leads women to a 1.8-year anticipated entry to the formal labor market. Importantly, this effect is not explained by women choosing to participate in the labor market instead of attending higher education. The effects on labor market outcomes across all margins are null for men. Third, changes in women’s transitions to employment and motherhood have long-lasting consequences: by the time they are last observed, women who participated in the program have accumulated more experience and earnings in the labor market, and they have fewer children than women who did not. In terms of mechanisms, I provide suggestive evidence that avoiding early-life pregnancies is necessary to observe the program’s positive effects on labor market outcomes. At the same time, education acts more as a reinforcing mechanism. Overall, this evidence suggests that cash transfers may be viable policies to improve women’s future life trajectories and contribute to reducing the labor market gender gap.