Using referenda to improve targeting and decrease costs of conditional cash transfers

Cost-effective allocation of conditional cash transfers (CCT) requires identifying recipients with low opportunity costs who might change behavior. This paper develops a low-cost approach for improving program implementation by using a stated preference, referendum-style survey question to calculate willingness to accept (WTA) for CCT contracts. We illustrate this in the context of Mexico's Payments for Ecosystem Services Program, and find that the estimated social cost based on WTA is substantially lower than actual payments. Simulation of three geographic targeting approaches shows that joint selection using deforestation risk and WTA could increase program impact under the same budget. We also simulate modified payment schedules based on predicted WTA and demonstrate that these could reduce program cost. (C) 2019 The Authors. Published by Elsevier B.V.