Safety Nets and Social Protection: Program Options and Design Considerations IPRCC-IFPRI International Conference POVERTY REDUCTION STRATEGY IN THE NEW MILLENNIUM Emerging Issues, Experiences and Lessons 23–24 May 2006, Beijing, China Dr. Michelle Adato Food Consumption and Nutrition Division IFPRI

Outline of Presentation Key concepts Key concepts Why safety nets? Why safety nets? Program options Program options Considerations in program choice and design Considerations in program choice and design Information gaps and areas for research Information gaps and areas for research

Key concepts: Safety nets and social protection Nets, ropes, and ladders Nets, ropes, and ladders Social assistance, social insurance Social assistance, social insurance Protective (relief); preventive (avert deprivation); promotional (enhance incomes & capabilities) Protective (relief); preventive (avert deprivation); promotional (enhance incomes & capabilities) Family, community, employer, NGO, state Family, community, employer, NGO, state

Why public safety nets? Erosion of private safety nets (family, community, landlord, employer) Erosion of private safety nets (family, community, landlord, employer)  Economic change & changing social structure  Shocks: repeated, multiple & affecting many  Climate, illness, conflict  Reduction of formal employment Reduce impact of shocks and new trends Reduce impact of shocks and new trends  Climate, economy, conflict Protect people who suffer from chronic poverty or vulnerability due to Protect people who suffer from chronic poverty or vulnerability due to  Economic conditions  Natural resource endowments  Age  Disability  Discrimination

Why Safety Nets? (continued) Promote growth Promote growth  Temporary shocks => long-term consequences  Human capital investment => productivity =>growth  Reduced expenditures on social problems Political stability Political stability Ethics Ethics

Short-term buffer or long-term development? Immediate income or food transfer Immediate income or food transfer Investment in human capital Investment in human capital  Health, nutrition, education, skills Investment in productive activities Investment in productive activities  Productive Infrastructure  Land or environmental improvement  Agriculture  Small enterprises Investment in care Investment in care  For children; ill people

Program options 1: Insurance Types: Types:  Health; unemployment; Injury/disability; life; old- age; assets Life cycle or event-triggered Life cycle or event-triggered Allocation of contributions Allocation of contributions  From government, private sector, beneficiaries Informal sector Informal sector

Program options 2: Price subsidies and Vouchers Price subsidies Price subsidies  Food, utilities, housing, services  Options: targeted; rationed; seasonal Food stamps or vouchers Food stamps or vouchers School vouchers or scholarships School vouchers or scholarships

Program Options 3: Cash Transfers Unconditional Unconditional  Direct food or cash transfer as basic safety net; no obligations Conditional Conditional  E.g. on participation in services: usually health, nutrition and education  Can be designed to achieve varied and integrated objectives, e.g. Maternal and Child Health, Early Childhood Development  Often includes adult education  Can have work obligations  Usually requires upgrading of services and infrastructure

Cash Transfers (continued) Considerations in conditioning Considerations in conditioning  What is the problem?  Demand or supply constraints?  Need for incentives  Condition on what?  Public attitudes toward social assistance  Labor market and disincentives  Urgency of social assistance  Barriers to participation in services  Costs

Program options 4: In-kind transfers Food distribution Food distribution  Unconditional  Emergencies, conflict, severe poverty  Conditional  on training in income generating activities, nutrition, literacy, numeracy, savings accounts;  on school attendance; on work

In-kind Transfers (continued) School feeding School feeding  Meals or snacks Direct feeding Direct feeding Maternal and Child Health & Nutrition Maternal and Child Health & Nutrition  Combines services with take-home food rations

Program options 5: Micronutrient strategies Supplementation Supplementation Fortification of food Fortification of food Dietary diversity and combinations Dietary diversity and combinations

Program options 6: Productive activities Support for agriculture Support for agriculture  Package of seeds, inputs, credit, training Public works Public works  Transfer (cash or food?)  Productive infrastructure (cost-effectiveness?)  Skills training (current income & second round effects)  Considerations: gender, seasonality, labor markets Microfinance Microfinance  Role of public and private sectors  Individual or group-based  Usually cash but can include in-kind loans

Considerations in program choice & design 1: Objectives & Capacities Priority problems and objectives Priority problems and objectives  E.g. income poverty; malnutrition (type?); education deficits (for whom?)  Ex-ante protection (insurance) or ex-post remedy (relief or reversal of trend)? Short-term or continuous? Short-term or continuous?  Budgets  Time horizon of problem Service availability or potential for increase Service availability or potential for increase Administrative complexity and capacity Administrative complexity and capacity  Technical; information systems; governance Centralized, decentralized or mixed? Centralized, decentralized or mixed?  Financing  Design and implementation  Role of community participation in targeting, oversight, implementation  Comparative advantages in capacities and knowledge

Considerations 2: Targeting Targeting Targeting  What target groups prioritized and why? Life cycle approach Conceptual basis for targeting Conceptual basis for targeting  Saves budgetary resources, and avoids more taxation  Maximizing welfare impact, equity, fairness  Political support Mechanisms for targeting Mechanisms for targeting  Geographic (marginality indexes)  Individual/household survey (e.g. income; consumption; HH composition; education; assets) –collected at home or center  Categorical or demographic targeting  Categorical or demographic targeting  Self-targeting  Community-based targeting  Costs? Errors of exclusion and inclusion Errors of exclusion and inclusion  Measurement errors  Politics  Equality and social relations  Appeals process

Targeting: Some general findings Out of 122 antipoverty interventions in 47 countries (Coady, Grosh and Hoddinott 2004) Out of 122 antipoverty interventions in 47 countries (Coady, Grosh and Hoddinott 2004)  Median program transfers 25% more to the poor than universal or random allocation  25% of programs delivered less to the poor than universal or random  Best performance: Means testing, geographic and self- selection based on work requirement  Progressive but more variable: Proxy-means test, community-based, and demographic-young children  More limited potential: Demographic-elderly, food subsidies and community bidding  However, no single best targeting method  Only 20% of outcomes attributed to method choice  Implementation more important!

Considerations 3: Costs and Financing Cost effectiveness (in achieving objectives) Cost effectiveness (in achieving objectives) Financing Financing  What is the size of the budget?  Can it be increased? Economic and political considerations  Who finances?  Donor or treasury?  Who has the resources? –Central, regional or local government? –Public-private partnerships –Beneficiary contributions  Availability of in-kind resources?

Considerations 4: Level of benefits Poverty levels and poverty line Poverty levels and poverty line Cost of living Cost of living # of HH members # of HH members Market wage rates Market wage rates Opportunity costs of participation in services Opportunity costs of participation in services Budget Budget Coverage Coverage

Considerations 5: Economic and Social factors Functionality of markets Structure of economy Structure of economy  Size of formal & informal sectors  Migration  Labor market conditions  Labor surplus or shortages  Will transfers reduce incentives for labor market participation?  Effect on wage rates?  Design features that reduce disincentives (size of transfer, conditioning) Household structure and social relations, including gender relations Household structure and social relations, including gender relations Cultural practices Cultural practices Depth of poverty, skills, individual capacities Depth of poverty, skills, individual capacities  E.g. microfinance vs. HC approach

Considerations 6: Governance Legal framework Legal framework  Discretionary or entitlement? Integrity Integrity Incentives Incentives Conflict Conflict  Special needs Capacities and interest of private sector and NGOs Capacities and interest of private sector and NGOs  Potential for state partnerships

Considerations 7: Other Health and illness Health and illness  HIV/AIDS, other Natural disasters Natural disasters  Response and anticipation Coordination and synergies between programs Coordination and synergies between programs  E.g. Geographical; seasonality Complementarity of services Complementarity of services  E.g. Food distribution with skills training (VLDP, Bangladesh); day care and Early Childhood Development (ICDS India); public works and home-based care of ECD (South Africa)

Considerations 7: Evaluation Why evaluate? Why evaluate?  Effectiveness in achieving objectives  Efficiency of resource allocation How often? How often? How financed? How financed? Control groups? Control groups? What to evaluate What to evaluate  Changes in key indicators (quantitative)  Changes in social dynamics (qualitative)  Operations  Effectiveness of behavior change components

Food versus cash for schooling in Bangladesh: Impact on school enrollment (A. Ahmed) Both FFE and PES encourage poor families to enroll their children in primary school. The rate of increase in enrollment was greater for (FFE (18.7%) than for PES (13.7%)

Information gaps & areas for research Comparative research on programs: costs, impacts, growth linkages, trade-offs Comparative research on programs: costs, impacts, growth linkages, trade-offs How to better integrate social protection and livelihoods activities How to better integrate social protection and livelihoods activities –Where is the line? –Where is the transition? –Innovations in integration  Types of activities  Transitions to labor market –Are there trade-offs? –What is the right mix?