were substantial: for example, a mother received 255 pesos per month, or 40% of the typical male laborer’s monthly earnings in these rural communities, if her ninth grade daughter was enrolled in school. Using this setting, we first estimate income and price effects. To identify price effects, we exploit the fact that the introduction of the CCTs was randomized at the locality level: 63% of the localities received transfers immediately, while the other 37% started two years later. To identify income effects, we use variation in transfers to younger siblings below the age of 12 years, as enrollment below the age of 12 is almost 100%, implying the conditions of these transfers were non-binding.<sup>5</sup> In other words, transfers to younger siblings can be viewed as unconditional transfers to the household. Using detailed panel data from 1997-1999, we estimate income and price effects for secondary school aged children (children aged 12-15 years). We find substantial income effects, with average income effects around one-third as large as average price effects. These estimates imply a relatively high degree of curvature in the utility of consumption, with an implied coefficient of relative risk aversion of 1.05.<sup>6</sup> Using these estimates, we proceed to evaluate the size of the targeting benefit relative to the exclusion cost for households in Progresa villages with secondary school age children. Under the observed Progresa transfers, we find that this ratio is substantial: the targeting benefit is 88% as large as the exclusion cost. We then calculate the share of the Progresa budget that should be allocated to a CCT over a UCT based solely on targeting grounds (i.e., we calculate the share that equates the targeting benefit to the exclusion cost). We find that 41% of the Progresa budget should go to a CCT, implying that the targeting benefit is a quantitatively important benefit of CCTs in this setting (in comparison, under the observed transfers, 65% of the budget goes towards a CCT).<sup>78</sup> There are three factors driving this result. First, the opportunity cost of sending a teenage child to school in these villages is high. We estimate that 12-15 year-old children earn around 72% as much as their fathers. Second, parents sending their teenage children to school do not earn substantially more than parents not sending their teenage children to school, i.e., parental income inequality among eligible households is low. Third, we estimate substantial curvature in the utility of consumption. Taken together, these three factors imply that schooling households have higher marginal utility of consumption, on average, than non-schooling households. Hence, allocating some of the budget towards a CCT better targets transfers to households who place a higher value on receiving an extra dollar today.

> 5. We control for the direct effects that sibling composition has on enrollment.

> 6. I.e., we estimate the coefficient _γ_ in the utility function _u_ ( _c_ ) =<sup>_<u>c</u>_</sup> 1<sup>1</sup> _−_<sup>_−_</sup> _γ_<sup>_γ_tobe1.05.</sup> 7. I.e., of Progresa spending to households with a secondary school age child, 65% is spent on CCTs to these children, whereas 35% is spent on (effectively) unconditional transfers to these children’s younger siblings. 8. Moreover, if we restrict the planner’s choice set to either a pure UCT or a pure CCT, we find that social welfare is higher under a pure CCT.

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