Consumption Smoothing, Frequency of Benefit Payments, and Effectiveness of Social Programs

ABSTRACT: We study the effect of differences in payment frequencies (monthly and bimonthly) across two noncontributory pension programs in Yucatan, Mexico. Compared to the bimonthly program, the monthly program increased doctor visits, reduced the incidence of hunger spells and lessened the need for support from charities. Under the bimonthly program expenditures on food and beverages significantly decreased near the end of the pay-cycle, while in comparison with the monthly program expenditures on more expensive non-cereal food as well as ownership of durable goods are higher. The results suggest that frequency of benefit payments is an important design feature of social programs. #4843