Education is one of the prime factors of growth. Developing countries actively seek policy measures to bring their children to schools and reduce dropout. In that effort, Conditional Cash Transfers (CCT) as well as motivational campaigns are common strategies applied to attract enrollment and retention. However CCT has been found to have limited effects. Also low retention rate is a problem for CCT programs. This current study tries to find a theoretical explanation of this problem. This study has demonstrated that conditional stipends will be effective only if it is sufficient to keep the household at its original level of utility. This gives a rational economic explanation of dropout of students forgoing CCT program. However as the marginal cost of stipend increases with rising educational requirements, governments should focus more on using advertisement to persuade households to invest in education for their children.
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