Ariel Fiszbein Chief Economist Human Development World Bank

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Ariel FiszbeinChief EconomistHuman
DevelopmentWorld Bank
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Motivation

• Many developing countries around the world have
  conditional cash transfer (CCT) programs in place
• CCTs have shown positive results through credible
  impact evaluation studies source of their
  popularity
• Focus on household behavior relevant for social
  policies in developed countries as well
• Policy Research Report summarizes lessons of
  experience

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Outline

1. Present findings of report
2. Discuss implications for social policy

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The CCT revolution
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The CCT Revolution
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Motivation

• Programs vary, but all share some basic
  characteristics
• They transfer cash
• They ask that households comply with a series of
  conditionsgenerally, school enrollment and
  attendance, often also attendance at health
  centers for young children
• They are targeted to the poor
• Twin objective promise of programs
• Reduce current consumption poverty
• Promote accumulation of human capital

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A family of program approaches
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CCT impacts on poverty

• Message 1 CCTs have generally led to substantial
  reductions in consumption povertyin particular,
  when transfers are large
• In Nicaragua, the Red de Protección Social, a
  pilot program, reduced the poverty gap among
  beneficiaries by 18 percent
• In Mexico, PROGRESA (now Oportunidades), a
  program with national coverage, reduced the
  poverty gap in rural areas by 19 percent

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Impacts on consumption and poverty
Mexico (1999) Nicaragua (2002) Colombia (2006) Honduras (2002)
Average transfer ( of per capita consumption) 20 30 13 11
Impact on per capita consumption () 8.3 20.6 10 7
Impact headcount index ( points) 1.3 5.3 2.9 --
Impact poverty gap ( points) 3.0 9.0 7.0 2.0
Impact sqd. poverty gap ( points) 3.4 8.6 2.2 2.0

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CCT impacts on poverty

• Why have CCTs reduced consumption poverty?
• They are well-targeted
• They have made transfers of (in some cases)
  substantial magnitude
• They have not reduced adult labor market
  participation
• They have not generally crowded out other
  transfers, and have not had substantial (local)
  general equilibrium effects
• Transfers (which are generally made to women)
  have also changed the composition of consumption
• More expenditures on food, and on higher-quality
  sources of calories

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CCT impacts on food consumption
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Impacts on health and education outcomes

• Message 2 CCTs have resulted in substantial
  increases in the utilization of education and
  health services especially among poor
  households
• Examples education
• In Mexico, Oportunidades decreased dropout
  between 6th and 7th grade by 9 points
• In Pakistan, the Punjab Education RSP increased
  the school enrollment of 10-14 year-old girls by
  11 points
• In Cambodia, two pilot programs reduced the
  dropout between 6th and 7th grade by 20-30
  points
• Examples health
• In Colombia, Familias en Acción increased the
  proportion of children who had growth monitoring
  by 20-30 points
• In Honduras, PRAF increased the proportion of
  children who had at least one preventive health
  visit by 20 points

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Impacts on school enrollment

Age range Baseline enrollment Impact ( points) Size of transfer
Colombia 8-13 14-17 91.7 63.2 2.1 5.6 17
Chile 6-15 60.7 7.5 3-7
Ecuador 6-17 75.2 10.3 10
Mexico Grade 0-5 Grade 6 Grade 7-9 94.0 45.0 42.5 1.9 8.7 0.6 20
Nicaragua 7-13 72.0 12.8 30
Cambodia Grade 7-9 65.0 31.3 2
Pakistan 10-14 29.0 11.1 3
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Impacts on health service utilization

Age range Baseline level Impact ( points) Size of transfer
Colombia lt24 months 24-48 months n.a. n.a. 22.8 33.2 17
Chile 0-6 years 17.6 2.4 7
Ecuador 3-7 years n.a. 2.7 10
Honduras 0-3 years 44.0 20.2 9
Mexico 0-3 years 69.8 8.4 20
Nicaragua 0-3 55.4 13.1 27
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Impacts are concentrated on the poorest households

• Example Nicaragua

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Impacts on education and health outcomes

• Message 3 Despite increase in service
  utilization, CCTs have had only mixed success in
  terms of improving final outcomes in education
  and health
• Education
• Increases in school enrollment and years of
  completed schooling have not come hand-in-hand
  with improved learning outcomes
• Health
• Some programs, but my no means all, have improved
  child nutrition (as measured by height-for-age,
  hemoglobin status)

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CCT impact on child nutrition

Age range Baseline level Impact ( points) Size of transfer
Colombia lt24 months 24-48 months n.a. 0.16 0.01 17
Ecuador lt24 months 24-48 months -1.07 -1.12 -0.03 -0.06 10
Mexico 12-36 months n.a. 0.96 cm 20
Nicaragua lt60 months -1.79 0.17 27
Honduras lt72 months -2.05 -0.02 9
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Impacts on child development (children age 3-6)
Nicaragua Ecuador (poorest 40) Ecuador (poorest 10)
Receptive language 0.223 (0.078) 0.011 (0.108) 0.177 (0.148)
Memory 0.092 (0.072) 0.192 (0.105) 0.228 (0.109)
Socio-emotional 0.067 (0.065) 0.150 (0.103) 0.389 (0.159)
Fine motor 0.150 (0.110) 0.160 (0.076) 0.288 (0.117)
Note all program impacts are in standard deviations. Note all program impacts are in standard deviations. Note all program impacts are in standard deviations. Note all program impacts are in standard deviations.
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Outline

1. Present findings of report
2. Discuss implications for social policy

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Designing transfers to maximize impact on human
development outcomes

• Which behaviors should be targeted?
• Quality of services what kind of services are
  beneficiaries of welfare programs actually
  receiving?
• Incentives to service providers
• Intermediation services
• Conditioning on outcomes?
• If under control of beneficiaries (e.g. STDs)
• If combined with incentives to providers (e.g.
  learning outcomes)
• Bonuses

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Designing transfers to maximize impact on human
development outcomes

• Change behaviors within households that prevent
  the accumulation of human capital.
• Programs to improve parenting and early
  stimulation (as in the pláticas of
  Oportunidades or social-worker support as in
  Chile Solidario)
• Targeting the right age group
• Life-cycle skill formation as dynamic process
  (Heckman et al.)
• Early stimulation and pre-school programs

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Why condition?

• Economic justifications
• Persistently misguided beliefs
• Incomplete altruism
• Externalities
• Political economy justifications
• Greater support for a program that appears to ask
  beneficiaries to do something to help
  themselves
• CCTs as new contract between the state and
  beneficiaries. Emphasis on co-responsibilities
  not conditions
• Research on social perceptions (e.g. Brazilian
  press, Argentina opinion polls)

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Do conditions work?

• Conditions do play a role in increasing service
  use beyond income effect (at least in education)
• Mexico Children in households w/o monitoring
  5.4 points less likely to enroll in school
• Ecuador Program effects are only significant for
  households that believed transfer are
  conditional
• Cambodia Program has no effect on enrollment for
  siblings at other levels

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Avoiding negative effects of transfers

• Why didnt CCTs have negative effects on labor
  supply?
• Leisure effect low b/c of fine targeting
• Avoided high marginal tax rates by use of
  proxy-means and infrequent update
• Design options
• Time limits (Chile)
• Graduated benefits (Brazil)
• Combining with other programs (e.g. workfare)

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Institutional Issues

• CCTs have had important institutional legacies
• CCTs have led the way in the design of well-run
  administrative structures for beneficiary
  selection, payments, transparency
• CCTs have been groundbreaking in terms of the
  importance they have paid to impact evaluation
  with credible counterfactuals

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END