Conditional cash transfer programs for development

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Conditional cash transfer programs for development

• François Bourguignon
• Ecole des Hautes Etudes en Sciences Sociales /
  Delta, Paris
• Torino, 23/04/03

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Motivation

• What kind of social protection for the informal
  sector and poor people in developing countries?
• - Limited scope for standard insurance
  instruments
• - Need for structural support to build up
  long-run earning capacity or to prevent running
  down existing assets
• Hence
• - Universal and self-selection programs (health
  care, food for work, lump-sump pensions..)
• - Conditional cash transfer programs (CCTPs
  means-tested transfers additional
  conditionality)

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Outline of presentation

• Rationale for CCTPs
• Progresa/Oportunidades as an example
• - Format of the program
• - Evaluation and outcome
• - Extensions in Mexico
• - Extensions to other countries
• 3) CCTPs as the first step towards a Welfare
  State in developing countries ?

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1) Rationale for CCTPs

• a) Redistributing assets from rich to poor may
  enhance economic efficiency. (Marginal product
  and rationing argument)
• b) Redistributing income or purchasing power may
  entail efficiency losses distortion of price
  system and incentives.
• c) CCTPs as a way of meeting the first objective
  while minimizing efficency losses.

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2) Progresa/Oportunidades in Mexico

• Format of the program
• Means-tested program (permanent income below
  some level), revised after three years.
• Transfer given to mothers based on school
  attendance by children (from 10 to 50 depending
  on grade and gender)
• Compulsory health examination for all kids
• Nutritional program for lactating women, young
  children, old people
• Launched in 1998 in the rural sector. Was
  reaching 40 of rural households by 2001. Being
  now launched in urban sector.

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2) Progresa/Oportunidades in Mexico

• b) Evaluation and outcomes
• - Evaluation by randomized experiment (due to
  staggered implementation, see IFPRI)
• Rural poverty drastically diminished ( 15
  average increase in income per capita among the
  beneficiaries)
• Demand for schooling increased (1 for primary
  but 5 to 7 for secondary , additional number of
  years of schooling .66)
• Noticeable progresses in nutrition and health
  status (reduced prevalence of several diseases)
• In schooling, and to a lesser extent health,
  conditionality shown to play crucial role (pure
  income transfers would not do as well, Procampo
  vs. Progresa).
• Total cost .2 of GDP ( of which .016 for
  adminsitrative costs)

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2) Progresa/Oportunidades in Mexico

• c) Extensions in Mexico
• Extensions to urban areas (in progress)
• Link with other programs micro-credit, housing
  credit, fellowships for college education,
• Dynamic setting ( plataforma ) forced savings
  for high school graduates and link to other
  programs (micro-credit, housing, college
  education, health insurance, ..)

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2) Progresa/Oportunidades in Mexico

• d) Extensions to other countries
• Extensions to other countries in Latin America
  (Brazil Bolsa Escola, Colombia, Honduras,
• Extensions to Asian countries food for school
  in Bangladesh
• Extensions to African countries conditionality
  likely to be more powerful, administrative costs
  likely to be higher and governance possibly more
  difficult. Are programs like school lunches
  good substitutes ?

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3) Final remarks are CCTPs a first step
towards a Welfare State ?

• The ambiguous  insurance  content of CCTPs
• The possible linkage of CCTPs to voluntary
  contribution to a social security (pension)
  system
• The universality of health care
• Public work programmes (Trabajar, food for work)
  as an alternative to unemployment insurance (
  severance payments)