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24 - Econ 196 Topic Applied Micro/Development The Health...

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Econ 196 Topic: Applied Micro/Development The Health Impact of Oportunidades Introduction Oportunidades is a successful Mexican anti-poverty program that has been used as a model for similar programs worldwide. The program takes a novel approach to fighting poverty by essentially paying families to make good health and educational decisions. Numerous studies have shown that the program does promote health and educational improvements among participants. However, a recent series of studies by Fernald, Gertler, and Hou find that the more money families receive, the worse the health of adults, relative to participant families who receive less cash. In contrast, the opposite is true for the health of children. Focusing on the health component of Oportunidades , this paper provides an economic explanation for this empirical finding. Initiated in 1997 under the name Progresa, the program targets Mexican families below the poverty line, offering monetary incentives for health and educational gains. The goal is to encourage poor families to invest in human capital and alleviate the effects of poverty by way of cash transfers. Participant families receive money from the government every month, conditional on keeping their children in school, getting biannual check-ups at clinics, and having adult members of the family attend regular health seminars. Empirically, Oportunidades has largely been deemed a success. Nigenda (2005) details a laundry list of positive health outcomes, including a fivefold increase in preventive consultations, decreased maternal and infant mortality, lower disease incidence in younger children, and reduced infant malnutrition, among others. Gutierrez, et al (2004) find a 20 percent reduction in days of reported illness among adults. Finally, Fernald, Gertler, and Hou (henceforth FGH) (2008a) report that the program reduces adult obesity and hypertension and increases self- reported adult health. However, these results are subject to one important qualification. A second study by FGH (2008b) finds that increasing the amount of cash is correlated with worse health outcomes for adults (higher BMI and increased prevalence of hypertension and obesity), while the opposite is
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true for children. Thus, cash transfers, while intended to function as incentives for positive health gains, seem to carry unforeseen negative health outcomes but only for a certain age group. FGH speculate briefly on a few explanations for these findings, but perhaps the most cogent story is that with the cash they receive, adults purchase more unhealthy food for themselves but not for their children. Unfortunately, they do not have the data to confirm this hypothesis. Our goal is to flesh out the economic story behind this explanation. The first section of this paper reviews in more detail the studies by FGH. The second section presents a simple intertemporal model of dieting in which an agent must decide between junk food and healthy food, facing an income stream each period. Junk food carries future health costs, which are time-discounted. The costs are further discounted to capture the role of
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