CASH TRANSFERS: INTRODUCTION & OVERVIEW

1 Kat hy L i n d e r t , Wo rl d B an k S o c i al S afet y N et s Co re Co ur s e De c e m b e r 2 014 CASH TRANSFERS: INTRODUCTION & OVERVIEW 1 We have poverty -targeted cash transfer programs in my home country. Your Answers: A. I agree B. I disagree C. I don t know 2 CLICKER QUESTION My job involves working with cash transfer a program (in any country). Your Answers: A. Yes and the program is already operating B. Yes but the program hasn t started yet C. No but we are considering it D. No 3 CLICKER QUESTION OUTLINE What, Why, and When?

2 Basic Design Choices for Cash Transfers Cash Plus: Enhanced Design Options Implementation Matters! 4 5 WHAT ARE CASH TRANSFERS? Cash transfer programs provide (predictable and regular) income support to the poor and certain vulnerable groups 6 COMMON OBJECTIVES OF CASH TRANSFERS Increase the incomes of the poor: Ideally in a predictable manner To help alleviate poverty Also used for redistribution objectives, to compensate for inequality in labor markets Smooth consumption: Help people cope with the consequences of shocks Facilitate other government reforms, , Consolidate other social programs Compensatory measures for other reforms (such as energy subsidies) WHY GIVE CASH?

3 Effective (supply-side factors). Can be cheaper vehicle to deliver benefits than in-kind benefits ( , food) choice (demand-side factors). Because cash doesn t distort consumer preferences or presume to know what the individual families need. 7 If we give poor people cash, they will just spend it on stuf f like alcohol, tobacco, or luxury items. Your Answers: A. I agree B. I disagree C. I sort of And I sort of disagree 8 CLICKER QUESTION HOW DO BENEFICIARIES SPEND THEIR CASH? M o s t o f Pa nt awid c a s h g rant s fi nanc e b as i c ne e d s : Fo o d ( a l m o st h a l f o f g ra nt s ) Sp e nd ing i n H u man C a p i tal ( 2 5 % e d u c at io n, 7 % h e a lt h) V i r t ua lly n o ne o f t h e m f i na nc es r e c rea t io n o r a l c o ho l.

4 Data source: FIES 2012 9 Example from Philippines CCT When is Cash Appropriate? Situations of Chronic Pover ty Situations of Shocks Emergencies with adequate food supply Transitory shocks When deliver y of benefits feasible: Access to financial facilities (permanent or mobile) Food and other necessities are available When is Cash Inappropriate? W h en s u p p ly o f e s s e nt ial g o o d s d i s rupted ( wa r s , na t u ra l d i s a ster s ) S h a l low fi na nc i al m a rket s ( h ard to move c as h ) W h en s a fety net i s f u nd e d wi t h i n-k i nd c o nt ri b u tio ns ( fo o d a i d ) 10 WHEN & WHEN NOT TO USE CASH AS PART OF THE SAFET Y NET Plus Political Economy Considerations Philippines Typhoon Yolanda 2013 7 million people af fected, 4 million people displaced Pantawid CCT transfer s were distributed as par t of a broader response (also food, shelter, reconstruction, etc.)

5 Conditionalities for education & health waived during disaster (as a matter of policy) Pakistan 2010 Floods 5 2 % s u f fered t h e tot a l c o l l a ps e o f a l l h o u s i ng s t ru c t ures ; 7 2 % we re d i s p lac ed f ro m t h e i r h o m e s P h a se-1 c a s h d i s bur s ed to 1 . 7 mi l l ion f ami lies i n fi r s t 6 m o nt h s ( g e o graphic t a rg et ing) P h a se-2 c a s h d i s bur s ed to 1 . 2 m i l l io n h o u s e ho lds ( u s i ng h o u s i ng d a m age a s a p rox y ) M a j o rit y s p e nt t ra ns fer o n fo o d , m e d i c ine, h o u s i ng re p a ir s, & d e b t re p ay ment 11 CASH IN EMERGENCIES ( U S UA L LY A S PA R T O F B R OA D E R R E L I E F PAC K AG E ) OUTLINE What, Why, and When?

6 Design Choices for Cash Transfers Implementation Matters! Beyond Cash: Enhanced Design Options 12 13 SO SIMPLE, RIGHT? (DESIGN PARAMETERS) How much should they receive? (Size of Benefit) Who to Pay? (Designated Recipients) How often to pay benefits? (Frequency of Payments) Who to Support? (Target Group) How many to support? (Coverage & Budget) How long Should they receive benefits? (Length of Enrolment) How to Structure Benefits with Conditions? (CCTs) 14 WHO TO SUPPORT? CHOOSING A TARGET GROUP The Poor People with Disabilities children The Elderly Categorical Benefits (may also be poverty targeted Who to Support?)

7 (Target Group) Targeting mechanisms (often in combination): Geographic targeting Household Eligibility Criteria: Means-tests & proxy means tests (PMT) Community-based targeting [To be covered in detail in another session] There is no perfect targeting: Poor typically receive 40-80% Not efficient to narrowly target beyond 70-80% (costs, incentives, errors of exclusion) Political support for narrowly targeted programs? 15 TARGETING THE POOR: DESIGNING ELIGIBILIT Y CRITERIA TARGETING THE DISABLED: FUNCTIONAL VS MEDICAL CRITERIA FOR DETERMINING DISABILIT Y Definition Advantages Disadvantages Functional: Degree of Inability to work Conceptually appropriate Consider full set of medical and other circumstances Sensitive to context (accessibility of transportation, buildings, types of jobs, etc.)

8 More complex to implement Possible discretionary decisions Moral hazard Medical: Based on official list of impairments or diagnoses Simpler to guarantee equal treatment of people with same conditions Easier to verify Does not recognize differences in severity Does not recognize interactions among multiple conditions Lists can be politically difficult to agree on 16 M a ny p ro g r a m s t a r g e t c h i l d r e n : Family and Child Allowances (universal or pover ty-targeted) Benefits for Orphans & Caregivers Conditional Cash Transfers (CCTs) Ta r g e t i n g C r i te r i a : AGE: (varies) Newborns (0-2) bir th allowances (ECA: to promote fer tility) O-5 (ver y young children ) Sc hool A ge: 6-15, or extend to 1 8 Youths Only SOCIO-ECONOMIC STATUS: Orphans Pover ty-targete d vs Univer sal OTHER CONSIDERATIONS: Child linked to which adult?

9 Or which household? What happens with divorced parents (or missing parents)? Payment to whom? (Designated recipient) Need strong social registr y 17 TARGETING children : CHILD-RELATED BENEFITS But with high coverage of the poor in some countries Mixed redistributive performance Means-tested Not Means-tested Source: ECA SPEED: Performance Module 18 Europe & Central Asia FAMILY & CHILD ALLOWANCES NOT ALWAYS TARGETED TO POOR O b j ec tives : To e ns u re s o m e b a s e l evel o f i nc o m e s u p p o r t fo r t h e e l d erly ( no n-c o nt ri b uto r y ) Ta rget ing C ri teria : AGE.

10 Usually 65+ or 70+ Need strong social or civil registr y Ghost beneficiaries (death records) SOCIO-ECONOMIC STATUS: Targeted or universal? Universal basic benefit for all elderly: , Botswana, Mauritius, Namibia, Seychelles, Georgia, Bolivia, Japan, Korea, New Zealand, etc. Targeted to poor elderly (usually means-tested): , South Africa, Cape Verde, Peru, Colombia, Costa Rica, Ecuador. El Salvador, Paraguay, US, Germany, UK, etc. TARGETING BASED ON PENSION STATUS Some countries use social pensions to reach populations not covered by contributor y pensions to reach universality of old-age coverage Examples include: Lesotho, Swaziland, Panama, Mexico, Argentina, Chile, Uruguay, etc.