A COST-EFFECTIVENESS ANALYSIS OF DEMAND- AND SUPPLY-SIDE EDUCATION INTERVENTIONS: THE CASE OF PROGRESA IN MEXICO
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This paper is concerned with the issue of the most cost-effective way of
improving access to education for poor households in developing countries. We consider
two alternatives: (1) extensive expansion of the school system (i.e., bringing education to
the poor) and (2) subsidizing investment in education by the poor (i.e., bringing the poor
to the education system). To this end, we evaluate the Programa Nacional de Educación,
Salud y Alimentación (PROGRESA), a large poverty alleviation program recently
introduced in Mexico that subsidizes education. Using double-difference regression
estimators on data collected before and after the program for randomly selected control
and treatment households, we estimate the relative impacts of the demand- and supply-side
program components. Combining these estimates with cost information, we find that
the demand-side subsidies are substantially more cost-effective than supply-side
expansions.