How Effective Are Cash Transfer Programs in Mitigating Income Instability? Evidence from the AUH in Argentina

Income instability is one crucial determinant of household vulnerability to falling back into poverty in developed and developing countries. This paper examines the effectiveness of a nationally implemented cash transfer program as a buffer against income instability among vulnerable households in Argentina. Using nationally representative household surveys from 2004 to 2015, it compares the income stability of eligible and non-eligible households to the Universal Child Allowance (AUH) program by measuring the coefficient of variation of incomeand transitions into poverty over one and a half years. The findings reveal that the AUH significantly reduces the time spent in poverty by 16% compared to a scenario without the program. Additionally, the program demonstrates a capacity to smooth income fluctuations among eligible households, with an average reduction of 10%. Thiseffect is more pronounced when households experience a drop in income during the observed period. However, the program’s impact diminishes in households with lower resilience to economic shocks, such as single mothers or those with dependent grandparents