1. Ariel Fiszbein Chief Economist Human Development World Bank

2. 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

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

4. The CCT revolution

5. The CCT Revolution

6. Motivation Programs vary, but all share some basic characteristics: 1. They transfer cash 2. They ask that households comply with a series of conditions—generally, school enrollment and attendance, often also attendance at health centers for young children 3. They are targeted to the poor “Twin objective” promise of programs: 1. Reduce current consumption poverty 2. Promote accumulation of human capital

7. A family of program approaches

8. CCT impacts on poverty Message 1: CCTs have generally led to substantial reductions in consumption poverty—in 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

9. 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*

10. 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

11. CCT impacts on food consumption

12. 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 6 th and 7 th 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 6 th and 7 th 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

13. Impacts on school enrollment Age rangeBaseline enrollment Impact (% points) Size of transfer Colombia 8-13 14-17 91.7% 63.2% 2.1** 5.6*** 17% Chile 6-1560.7%7.5***3-7% Ecuador 6-1775.2%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 7-1372.0%12.8***30% Cambodia Grade 7-965.0%31.3***2% Pakistan 10-1429.0%11.1***3%

14. Impacts on health service utilization Age range Baseline level Impact (% points) Size of transfer Colombia <24 months 24-48 months n.a. 22.8** 33.2*** 17% Chile 0-6 years17.6%2.47% Ecuador 3-7 yearsn.a.2.710% Honduras 0-3 years44.0%20.2***9% Mexico 0-3 years69.8%8.420% Nicaragua 0-355.4%13.1*27%

15. Impacts are concentrated on the poorest households Example: Nicaragua

16. 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)

17. CCT impact on child nutrition Age range Baseline level Impact (% points) Size of transfer Colombia <24 months 24-48 months n.a.0.16** 0.01 17% Ecuador <24 months 24-48 months -1.07 -1.12 -0.03 -0.06 10% Mexico 12-36 months n.a.0.96 cm**20% Nicaragua <60 months-1.790.17**27% Honduras <72 months-2.05-0.029%

18. Impacts on child development (children age 3-6) NicaraguaEcuador (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.

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

20. 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

21. 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

22. 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)

23. 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

24. Avoiding negative effects of transfers Why didn’t 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)

25. 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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