The article examines local economy effects of social transfers by focusing on food consumption and asset holdings of noneligible households in rural Mexico following the introduction of Programa de Educación, Salud y Alimentación (PROGRESA) in 1997. The quasi experimental nature of the evaluation data collected for the purposes of evaluating the impact of PROGRESA enables comparison of welfare indicators among noneligible households in treatment areas and control areas. The analysis finds that noneligible households in treatment areas show significantly higher levels of food consumption and asset holdings following the introduction of PROGRESA, compared to noneligible households in control areas. These results are interpreted to suggest that transfers in poor rural areas in Mexico enable agents to interact more strategically such that nonbeneficiaries, as well as beneficiaries, reap consumption and production advantages.
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