Why do conditional cash transfer programmes fail to reach the poorest people? The case of urban areas in Mexico

Given the limited financing capacity of developing countries, conditional cash transfer programmes (CTPs) are an affordable way to provide a social safety net for vulnerable households. However, their conditionality can limit participation and increase dropout, especially when compliance requirements are high and cash incentives relatively low. This empirical analysis determines how cash transfer amounts affect the likelihood of households staying in or leaving a programme by studying the case of Mexico: a developing country that has progressively expanded its CTP from rural to urban areas. Using longitudinal household surveys, this study finds that poorer households are more likely to drop out of the programme. Moreover, the amount of cash transfers increases this likelihood for poorer participants compared to richer ones. It concludes that the programme fails to retain poorer households because the cash incentives are too low for urban settings.