CONDITIONAL & UNCONDITIONAL CASH …

1 Kat hy L i n de r t , Wo rl d B an k So c i al Safet y N et s Co re Co ur s e De c e m b e r 2 01 3 CONDITIONAL & UNCONDITIONAL CASH TRANSFERS 1 OUTLINE What, Why, and When to Use Cash? Types of cash transfer programs Design & Implementation 2 3 WHAT ARE CASH TRANSFERS? C a s h t r a nsfer p rograms p rov i d e c as h as s i s t anc e to t h e p oor a nd c e r t a i n v u l ne rable g ro u p s wo u l d c o u l d f a l l i nto p ove r t y O b j ec tives : Increase the incomes of the poor Help individuals and families cope with the consequences of shocks Facilitate government reforms ( , consolidation of other social programs; compensator y measures for other reforms such as energy subsidies) WHY CASH?

2 Ef fective (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. 4 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: Poor can access financial facilities (permanent or mobile) Food is available When is Cash Inappropriate? When supply of essential goods disrupted ( , war s, natural disaster s) When administrative targeting is not possible Shallow financial markets (hard to move cash) When safety net is funded with in-kind contributions ( , food aid) 5 WHEN & WHEN NOT TO USE CASH AS PART OF THE SAFET Y NET OUTLINE What, Why, and When to Use Cash?

3 Types of cash transfer programs Design & Implementation 6 Pove r t y-Ta r g e te d P ro g r a m s ( Last Resort Programs ) UNCONDITIONAL Cash Transfers (UCTs) CONDITIONAL Cash Transfers (CCTs) 7 T YPES OF CASH transfer PROGRAMS C a te g o r i c a l P ro g r a m s : Social Pensions (non-contributor y pensions to the elderly) Disability assistance Family & child allowances (Unemployment assistance) Near Cash Benefits: Food stamps Other vouchers Objectives: Guarantee a minimum income for poor households below an income threshold Benefit levels: Generally equal to the difference between monthly household income and the threshold, but var y according to household size UNCONDITIONAL (usually no co-responsibilities) Coverage: A safety net for the poorest.

4 In practice, most cover less than 5% Targeting: Usually based on income and asset testing by social workers through social welfare offices Complementary to other social protection (pensions, unemployment benefits, family allowances) 8 TARGETED CASH TRANSFERS: GUARANTEED MINIMUM INCOME PROGRAMS (GMI) E X A MPLES: M o s t O E C D c o u n t r i e s M o s t E C A c o u n t r i e s ( E U n e w m e m b e r s t a t e s , C a u c u s e s , B a l ka n s ) S o m e L I C s : ( e . g . , Ky r g y z Re p u b l i c , M o l d o v a ) C h i n a (D i b a o p r o g r a m ) GMI PROGRAMS: SIMPLIFIED ILLUSTRATION OF BENEFIT S CALCULATIONS 9 Minimum Subsistence Level of Income Actual pre- transfer income Benefits vary by distance to minimum subsistence level.

5 There are many ways to complicate a program 10 TARGETING ACCURACY OF GMI PROGRAMS IN ECA (LRSA) Source: world bank estimates from ECA SPEED database (2013) Usually very well targeted (but also with very low coverage) TARGETED PROGRAMS: CONDITIONAL CASH TRANSFERS Tw i n o b j e c t i ve s : Immediate poverty relief through provision of cash transfers Long-term poverty reduction by linking transfers to incentives for investments in human capital (co-responsibilities) P r i n c i p l e o f S h a r e d Re s p o n s i b i l i t y Give cash stipend to the poor Poor need to ensure they carry out co-responsibilities Ta r g e t i n g : Usually means-tested or proxy means-tested Often in combination with geographic targeting B e n e f i t l eve l s an d c ove r a g e var y 11 EXAMPLES: Most countries in LAC Several countries in East Asia & South Asia Several countries in Africa Several countries in ECA Several OECD countries 12 CCTs.

6 MENU OF CO-RESPONSIBILITIES ( S O M E E X A M P L E S P R O G R A M S V E R Y D I V E R S E ) *All LAC countries with CCTs *Macedonia, Romania, Turkey *Cambodia, Pakistan, The Philippines *Kenya Education (Enrollment, School attendance) * , Brazil, Chile, Colombia, Ecuador, Honduras, Jamaica, Mexico, Panama, Peru * Kazakhstan, Turkey * The Philippines Health Visits (prenatal, vaccines, child growth) *Chile Solidario (tailored family contract; meetings with social workers) *Colombia, Mexico, Panama (workshops) *The Philippines (Family Development Sessions) Participate in Workshops / Sessions with Promotores Often as complementary services (not conditions) *Brazil, Mexico, Ecuador *Kazakhstan *India, China Productive Activities / Other CCTs HAVE SPREAD TO OVER 40 COUNTRIES AROUND THE world WHY?

7 1997 2010 Countries with CONDITIONAL Cash transfer Programs 13 Why So Popular? A mong t h e mos t s t u d ied of al l s oc i al p rog rams H u nd re ds o f s t u d i es, i nc l u ding a c a d emi c W i d espread m e d i a s c ru t i ny PROVEN RESULTS: CCTS HAVE BEEN EXTENSIVELY EVALUATED 14 15 PROVEN RESULTS OF CCTS: SUMMARY OF IMPACTS Social Inclusion Poverty & Inequality Impacts Education Impacts Labor + Positive Economic Incentives Food, Nutrition, Health Impacts Encouraging effects on Early childhood Development Extensive coverage in many cases Bringing poor to formal economy, identity & use of services Good targeting accuracy (high share of benefits to poor) Strong in many countries Redistributive impacts depend on size of transfer , coverage of poor enrollment, attendance (bring the kids to school) drop-out (keep them in school longer) But less evidence of impacts on learning & test scores (supply-side issue.)

8 Quality of education system) Substantial reduction in child work Modest or no impacts on adult work effort (may LFP) Households invest part of the transfer (income-generating) Improvements in receptive language (Nicaragua) Memory gains (Ecuador) Socio-Emotional (Ecuador) Fine Motor Skills (Ecuador) Some evidence of impacts on malnutrition & food cons. More use of health services, especially among poorest Some evidence of lower morbidity & reduced child mortality Some evidence of higher detection of breast cancer & diabetes Tot al c o s ts o f C C Ts : About of GDP for larger programs CCTs often replace more expensive, badly targeted programs (fiscal consolidation) Countries spend far more on regressive programs: , 4% of GDP on deficits in pension systems (which largely benefit higher-income people) A d minis t rat ive c o s t s : Around 10-12% for most mature, large CCT programs Start-up costs can be much higher.

9 For example, in Mexico, administrative costs of beneficiar y selection fell from 61% in first year (1997) to 3% in 2001 . PROVEN RESULTS OF CCTs: FOR A RELATIVELY LOW COST 16 P h i losop hical a p p eal for social compact along the political s p e c t rum but with nuanced interpretations POLITICAL APPEAL OF SHARED RESPONSIBILITY B road p ol it ic al s u p por t for C C Ts by p ar t i es al ong p ol i t ic al s p e c t rum i n m a ny c o u nt ri es : CCTs introduced & supported across political parties & changes in administration in Brazil, Mexico and elsewhere Left: Social debt to the poor Structural impacts on poverty Conditionalities as basic rights Right.

10 Not so expensive (cost/GDP) Not just a cash handout Conditionalities as contracts 17 CCTs viewed as less assistencialista by both sides Window of opportunity for other reforms with impor tant role for fiscal consolidation: Consolidating social programs (BR Bolsa Familia, Romania) Replacing less efficient in-kind transfers (Mexico) Facilitating reduction or consolidation of energy subsidies (Brazil, Indonesia, Moldova, etc.) CCTs can help integrate & coordinate social policy: Boosting demand for health & education Enhancing focus on need for improving service quality (supply-side) Linking to other complementary services 18 ANOTHER ATTRACTION OF CCTs: CONSOLIDATING & COORDINATING SOCIAL Objectives: To e n s u r e b a s i c o l d-a g e s e c u r i t y f o r t h o s e n o t c ov e r e d by t h e c o n t r i b u to r y p e n s i o n s y s te m Eligibility: Va r i e s.