Question 66·Hard·Central Ideas and Details
Economic researchers Laura Mendez and Arjun Patel examined the effects of short-term unconditional cash transfers—one-time payments equal to three months’ average wages—on households in three rural regions.
- In Region A, where microcredit institutions are widespread, recipients did not start significantly more small businesses than non-recipients; instead, most used the money to repay existing loans.
- In Region B, where access to credit is scarce, recipients were 40 percent more likely than non-recipients to launch income-generating enterprises within a year of receiving the transfer.
- In all three regions, weekly hours worked in formal wage employment remained statistically unchanged.
Mendez and Patel conclude that unconditional cash transfers can complement, but do not substitute for, access to affordable credit and that their results “undermine the claim that such transfers discourage labor market participation.”
Based on the text, which choice best describes what Mendez and Patel would most likely agree about unconditional cash transfers?
For central-idea agreement questions, first restate the key cross-region pattern and the authors’ explicit conclusion (here: entrepreneurship rises where credit is scarce; formal wage hours don’t change; transfers complement but don’t replace credit). Then eliminate choices that (1) overgeneralize one region’s result to all contexts, (2) subtly flip the authors’ conclusion (complement vs. substitute), or (3) misrepresent what the authors explicitly say. The best choice will closely match the passage without adding new claims.
Hints
Focus on the contrast between Region A and Region B
Look closely at what happens in Region A versus Region B in terms of starting new businesses. Where do recipients launch more enterprises, and what is different about those regions?
Pay attention to the labor market finding
The passage mentions weekly hours worked in formal wage employment across all three regions. Did those hours go up, down, or stay about the same?
Use the authors’ own conclusion
Reread the sentence with “can complement, but do not substitute for” and “undermine the claim that such transfers discourage labor market participation.” Which option best aligns with those conclusions?
Watch for overgeneralizations and small wording shifts
Some choices may overextend one region’s result to all regions or slightly change the authors’ claim about credit (for example, turning “complement” into “substitute”). Be careful about those shifts.
Step-by-step Explanation
Pinpoint the key results in Regions A and B
First, compare what happened in Region A vs. Region B:
- Region A (credit widely available): Recipients did not start significantly more small businesses than non-recipients; they mostly used the money to repay loans.
- Region B (credit scarce): Recipients were 40 percent more likely than non-recipients to start income-generating enterprises.
This shows the entrepreneurial effect is stronger where credit is scarce than where credit is easy to get.
Incorporate the labor-hours finding and the authors’ conclusion
Next, use the broad findings and the researchers’ stated conclusion:
- In all three regions, weekly hours in formal wage employment were unchanged.
- The authors say cash transfers “can complement, but do not substitute for” access to affordable credit.
So, the best choice must match (1) the region-by-region entrepreneurship pattern and (2) the authors’ position on credit (complement vs. substitute).
Eliminate choices that misstate the scope of the findings or the authors’ conclusion
Check each idea against the passage:
- Choice B wrongly generalizes Region A’s debt repayment pattern to all studied regions and claims there was no meaningful increase in business formation overall. But Region B shows a clear increase: recipients were 40 percent more likely to start enterprises.
- Choice C treats the transfers as able to replace affordable credit. This conflicts with the authors’ conclusion that transfers “can complement, but do not substitute for,” access to affordable credit.
- Choice D says the findings don’t clearly address whether transfers discourage labor participation. But the authors explicitly state their results “undermine the claim that such transfers discourage labor market participation.”
Each of these choices either overgeneralizes one region, reverses the credit conclusion, or ignores the authors’ explicit takeaway.
Select the choice that matches the cross-region pattern
The remaining choice matches the passage’s central pattern: cash transfers increase entrepreneurship where credit is scarce (Region B) but not where credit is readily available (Region A). Therefore, the best answer is:
They are more likely to stimulate entrepreneurship in areas lacking access to credit than in areas where credit is readily available.