How effective are cash transfer programs in mitigating income instability ? evidence from the AUH in Argentina

Income instability is a crucial determinant of household poverty, particularly in developing countries where precarious employment is widespread and social protection tools are limited. This paper examines the effectiveness of a nationally implemented cash transfer program – the Universal Child Allowance (AUH) – as a buffer against income instability among economically vulnerable households in Argentina. Using nationally representative household surveys from 2004 to 2015, it compares the income stability of eligible and non-eligible households for the program by measuring their coefficient of variation of income and transitions into poverty over one and a half years. The findings reveal that the AUH effectively mitigates income instability for eligible households, reducing the proportion of periods spent in poverty by 15% and income fluctuations up to 16% compared to a situation without the program introduction. This stabilizing effect is particularly stronger for households experiencing a loss of income during the period, smoothing out income losses. While the program's effect is higher for households with several children or a young child, it is largely reduced for households that are less resilient to shocks, such as single mothers. Lastly, the AUH also affects households' financial behavior by reducing their reliance on in-kind and monetary donations, as well as their use of informal loans.