Motivation. Conditional cash transfer (CCT) programs have become very popular: first in Latin America and now across the world

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2 Motivation Conditional cash transfer (CCT) programs have become very popular: first in Latin America and now across the world

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5 Motivation Conditional cash transfer (CCT) programs have become very popular: first in Latin America and now across the world Programs vary, but all share some basic characteristics: 1. They transfer cash 2. They ask that households comply with a series of conditions generally, school enrollment and attendance, often also attendance at health centers for young children 3. They are targeted to the poor

6 Program size/target A family of program approaches Nationwide Niche (regional or narrow target population) Small scale/pilot Conditions Education and Health Education Only Bolsa Familia (Brazil) Oportunidades (Mexico) Bono de Desarrollo Humano (Ecuador) Bolsa Escola (Brazil) Familias en Acción (Colombia) Jaring Pengamanan Sosial (Indonesia) Program of Advancement through Health and Education (Jamaica) Female Secondary School Assistance Program (Bangladesh) Japan Fund for Poverty Reduction Girls Scholarship Chile Solidario Program (Cambodia) Social Risk Management Project (Turkey) Education Sector Support Project (Cambodia) Programa de Asignación Familiar (Honduras) Cash Transfer for Orphans and Vulnerable Children (Kenya) Atención a Crisis (Nicaragua) Red de Protección Social (Nicaragua) Basic Education Development Project (Yemen) Subsidio Condicionado a la Asistencia Escolar - Bogota (Colombia) Punjab Education Sector Reform Program (Pakistan)

7 Reasons for growing interest: CCTs have often replaced a myriad of badly targeted, regressive, ineffective subsidies and piece-meal programs CCTs as a new contract between the state and CCT beneficiaries. Emphasis on coresponsibilities rather than conditions Large-scale CCTs have survived political transitions CCTs have shown positive results through credible impact evaluation studies

8 Policy Research Report (PRR) 1. Under what circumstances do CCTs make sense? Economic justifications Political economy 2. What is the evidence that they have had impacts on consumption poverty and on human capital outcomes? Report draws heavily on a large number of credible impact evaluations more available for this class of program than for probably any other intervention in the developing world 3. Policy implications How to structure CCTs What complementary actions are needed

9 1. Conceptual basis for CCTs Why transfers? Why cash? Equity and efficiency reasons More efficient than in-kind unless missing markets Why conditions? Economic justifications Persistently misguided beliefs about returns to human capital Incomplete altruism between parents and children Externalities to education and health investments Political economy justifications Conditions increase political support to transfer programs Emphasis on co-responsibilities rather than conditions

10 2. Evidence of CCT performance: Poverty targeting Consumption and poverty Utilization of education and health services Final outcomes in education and health

11 Proportion of total benefits received CCT benefits are decidedly progressive 90% 80% 70% 60% 50% 40% 30% Bolsa Familia Chile Solidario Chile SUF Ecuador BDH Honduras PRAF Mexico Oportunidades Jamaica PATH Cambodia: JFPR Bangladesh FSSP 20% 10% 0% Deciles of per capita consumption minus transfer

12 Proportion of households receiving transfers but with significant variation in coverage 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% Bolsa Familia Chile Solidario Chile SUF Ecuador BDH Honduras PRAF Mexico Oportunidades Jamaica PATH Nicaragua RPS Cambodia: JFPR Bangladesh FSSP Turkey SRMP Education Turkey SRMP Health 10.0% 0.0% Deciles of per capita consumption minus transfer

13 Reductions in poverty among beneficiaries CCT impacts on consumption and poverty Median per capita consumption (US $) Average transfer (% of per capita consumption) Impact on per capita consumption (%) Impact: headcount index (% points) Impact: sqd. poverty gap (% points) Mexico (1999) Nicaragua (2002) Colombia (2006) Cambodia (2007) % 30% 13% 3% 8% 21% 10% ** 5.3** 2.9** ** 8.6** 2.2** --

14 Offsetting adjustments have been small Modest reductions in adult labor market participation (Mexico, Ecuador, Cambodia), Substantial reductions in child work: Mexico: child labor among teenagers fell by 2% points for girls, and 5% points for boys Cambodia: reduction of 10% points in work for pay; average of 14 fewer hours worked for pay No major impacts on remittances, fertility, or general equilibrium effects

15 Other positive effects on household welfare Changes in the composition of consumption (Ecuador, Nicaragua, Mexico, Colombia) Increase in food shares among beneficiaries Increase in quality of food (higher shares of food expenditures on meat, fruits and vegetables) Households invest part of the transfer (evidence for Mexico but not in Nicaragua)

16 CCT impacts on education outcomes CCT impacts on enrollment Age range Baseline enrollment Impact (% points) Size of transfer Colombia % 63.2% 2.1** 5.6*** 17% Chile % 7.5*** 3-7% Ecuador % 10.3*** 10% Mexico Grade 0-5 Grade % 45.0% *** 20% Grade % 0.6 Nicaragua % 12.8*** 30% Cambodia Grade % 31.3*** 2% Pakistan % 11.1*** 3%

17 CCT impacts on health outcomes CCT impacts on health center visits Age range Baseline level Impact (% points) Size of transfer Colombia <24 months n.a. 22.8** 17% months n.a. 33.2*** Chile 0-6 years 17.6% 2.4 7% Ecuador 3-7 years n.a % Honduras 0-3 years 44.0% 20.2*** 9% Mexico 0-3 years 69.8% % Nicaragua % 13.1* 27%

18 Impacts on education and health outcomes concentrate among the poor Example: Nicaragua

19 Child nutrition improved in some but not all cases CCT impacts on child nutrition (height-for-age z-scores) Age range Baseline level Impact (% points) Size of transfer Colombia <24 months n.a. 0.16** 17% months 0.01 Ecuador <24 months % months Mexico months n.a cm** 20% Nicaragua <60 months ** 27% Honduras <72 months %

20 Higher enrollment w/o improved learning? Mexico: More years of PROGRESA exposure lead to more years of schooling but no difference in language and mathematics tests Cambodia: Beneficiaries have more schooling than children in the control group but didn t perform better on mathematics or vocabulary test

21 Encouraging effects on early childhood development CCT impacts on child development (children age 3-6) Nicaragua Receptive language 0.223*** (0.078) Memory (0.072) Socio-emotional (0.065) Fine motor (0.110) Ecuador (poorest 40%) (0.108) 0.192* (0.105) (0.103) 0.160** (0.076) Ecuador (poorest 10%) (0.148) 0.228** (0.109) 0.389** (0.159) 0.288** (0.117) Note: all program impacts are in standard deviations.

22 3. Policy Implications Are conditions necessary? Targeting criteria Transfer size Entry and exit Complementary interventions Supply of services Social protection

23 Mexico: Are conditions necessary? Children in households w/o monitoring 5.4% points less likely to enroll in school Ecuador: Cambodia: Program effects are only significant for households that believed transfer are conditonal Program has no effect on enrollment for siblings at other levels

24 Defining the target population Poor households who underinvest in the human capital of their children Trade-offs between redistributive and human capital goals of the program Targeting groups with highest returns in terms of human capital may not be optimal in terms of poverty impact.

25 Target population: Trade-offs Mexico: Impact on enrollment significant at transition grades. But targeting transition reduces ability to redistribute income. Continuation rate (%) 100 Progresa villages Lower secondary school Primary school Cont rol villages 76% Secondary 64% PROGRESA INTERVENTION P2 P3 P4 P5 P6 S1 S2 S3 S4 Ent ering grade 50% 43% Upper secondary school

26 Survival Rate Poorest 20% Targets in Mexico and Cambodia: Implications for Efficiency and Equity Mexico (2002) Cambodia (2004) Grade

27 Transfer size: Other design issues Larger transfers lead to bigger impacts on consumption poverty Diminishing marginal returns to transfer size in terms of achieving human capital goals (e.g. Cambodia education)? Setting entry and exit rules: Minimize confusion and possible manipulation Unintended behavioral consequences if there are benefit cliffs and households reduce their labor market participation to avoid them Graduated benefits Time limits

28 Policy implications: Complementary interventions 1. Adequate the supply of health and education services: Improving access by building additional infrastructure, or finding alternatives for delivery: Done both by expanding the supply of public services (e.g. Mexico) and more use of private providers or NGOs (Central America) Improving the quality of the supply Pay-for-performance schemes for providers in parallel with the CCT (e.g. Bangladesh, Mexico)

29 Policy implications: Complementary interventions 2. Interventions that address other household constraints that limit ability of service providers to improve outcomes, e.g. Parenting interventions run through the CCT (as in the pláticas in PROGRESA or social workers in Chile Solidario) or in parallel, by a different program Early Childhood Development programs to provide a head-start (as in Jamaica) can help addressing low learning outcomes later on.

30 Policy implications: Complementary interventions 3. CCTs in the context of social protection policies CCTs cannot be the right instrument for all poor households For example, households without children, or the elderly poor CCTs have some limitations to respond to systemic or idiosyncratic shocks They are not self-targeted, and they involve long-term commitments, inherent in the conditions CCTs should be seen as complements, rather than substitutes for programs like workfare, unemployment insurance, social pensions

31 The institutional legacy of CCTs Led the way in the design of well-run administrative structures for beneficiary selection, payments, transparency Groundbreaking importance paid to impact evaluation with credible counterfactuals Contribute to improving the overall quality of public policies