This paper evaluates a large welfare programme in rural Mexico called Progresa, whose main aim is to improve the process of human capital accumulation in the poorest communities by providing cash transfers conditional on specific types of behaviour in three key areas targeted by the programme: nutrition, health and education. The aim of this paper is to analyse the impact of monetary incentives on education choices in rural Mexico and to address issues to do with the design of educational interventions aimed at improving educational participation. To achieve this the authors combine the information provided by the randomised allocation of Progresa across localities with a simple structural model of education choices. The authors argue that without such a framework it is impossible to evaluate the effect of the programme and, especially, possible changes to its structure.
