Should transfers to poor families be conditional on school attendance? A household bargaining perspective

This article considers the welfare implications of transfers to poor families that are conditional on school attendance and other forms of investment in children's human capital. Family decisions are assumed to be the result of (generalized) Nash bargaining between the two parents. We show that, as long as bequests are zero, conditional transfers are better for children than unconditional transfers. The mother's welfare may also be improved by conditional transfers. Thus, conditioning transfers to bequest-constrained families have potentially desirable intergenerational and intragenerational welfare effects. Conditioning transfers to unconstrained families make every family member worse off.