Summary: ‘How Should We Design Cash Transfer Programs?’ by the World Bank

From the YPF Policy Research team, we are conducting research on various pressing policy issues. The work includes taking a stock of existing evidence. This article summarizes some of the findings from the World Bank group research on cash transfers.
Source: News and Information
How Should We Design Cash Transfer Programs?
In the short run, Conditional cash transfers (CCTs) result in more improved human capital outcomes than unconditional cash transfers (UCTs)
  • CCTs outperform UCTs for the intermediate involvement indicators and, to a lesser extent, human capital outcomes. In two World Bank led impact evaluations in Burkina Faso and Malawi, the researchers found that CCTs had significantly higher impact on school enrollment, dropout, and test scores than UCTs, even taking the additional administrative costs of CCTs into account.
  • However, the same experiment in Malawi found that UCTs substantially outperformed CCTs in improving psychological well‐being and reducing teen pregnancy and child marriage rates. This shows that there could potentially be trade-offs between UCTs and CCTs.
  • In the case of CCTs, it has been reported that the effect size on school participation increases as the conditions are made more explicit, monitored, enforced which were founded by an orderly review of CCT and UCT programs.
  • Also, it is important to note that while UCTs are not much successful in developing the desired outcomes targeted when compared to CCTs, they nevertheless, can help the households who need income support.
In the longer run, the effects of UCTs dissipate
  • While there are few long‐term studies of unconditional cash transfers, the available evidence suggests that their short‐term effects are not sustained. Sometimes, this may be because the transfers put beneficiaries on an earlier/accelerated growth path than non‐beneficiaries.
  • In other cases, UCTs end up being palliative, meaning that they improve outcomes while the income support is in place, but fail to cause sufficient accumulation of human capital to alter long‐term outcomes. In such cases, UCT beneficiaries end up back at square one soon after the cessation of transfers. Children who are exposed to unconditional cash transfers in utero and between the ages of 0 and 5 are substantially less likely to be stunted, found by several recent studies.
  • Longer‐term evaluations of CCT programs, in contrast, offer room for optimism. Examples include:

    • a forced savings treatment attached to a traditional schooling CCT program in Bogotá increasing tertiary enrollment and graduation;
    • a CCT program in Malawi and a secondary school scholarship program in Ghana causing large gains in school attainment and substantial reductions in fertility among vulnerable female beneficiaries;
    • Nicaragua’s CCT program leading to substantial gains in learning among boys and reductions in fertility and increased economic activity among girls 10 years after they were exposed to the program as early adolescents;
    • and a school‐based intervention in Kenya that provided school uniforms finding significant reductions in school dropout, pregnancy, and marriage among girls in the short‐ and medium‐run; and school attainment, marriage, and childbearing by age 16 in the longer‐run.
How cash transfers are targeted and delivered are important program design elements
Declines in life satisfaction and reductions in psychological well‐being among non‐beneficiaries who live in the same communities as programs.
A recent World Bank study of the Philippine CCT shows that such effects can have real outcomes: price increases in protein‐rich perishable food items caused generous increases in stunting among non‐beneficiary children. So, it is important for the World Bank and governments implementing large‐scale transfer programs to pay attention to spillover and general equilibrium effects.
These findings have several implications for World Bank policies:
  • A potentially promising way of resolving the tradeoff between CCT and UCT programs is to view them as complements to each other rather than alternatives. Policymakers could provide a basic unconditional cash transfer to, say, adolescent females or poor households, topped up by conditional cash transfers for human capital accumulation and desired health behaviors –providing an incentive to invest in education and health while still guaranteeing a basic level of protection to those who are unable or unwilling to comply with program conditions.
  • The promising evidence of the positive effect of UCTs on children’s height provides an additional reason to consider providing basic UCTs to adolescent girls and young women. Indeed, other researchers in the U.S. context have suggested that targeting transfers towards women of childbearing age would be beneficial, to maximize benefits to children in utero. This form of targeting of young women would suffer from remarkably little ‘leakage’ in many countries in Sub‐Saharan Africa, where the median ages at first childbirth are below 20. It would also have the added benefit of reducing fertility rates.
  • The increasing popularity of “cash plus” programs, which involve cash transfers being delivered with complementary services/interventions, seems justified. For example, recent evidence from multi‐faceted anti‐poverty programs suggest complementarities between various program components, including cash transfers. A program in Bangladesh that combined a behavior change communication nutrition intervention with cash transfers through women’s groups that met regularly found beneficial impacts on several important domains for beneficiary women and their children.
  • Finally, more attention should be paid to the targeting of large cash transfer programs. Failing to consider the local market price effects of CCT (or UCT) programs can overstate the net benefits of targeted cash transfers. In areas where individual targeting of social programs covers most of the households, offering the program on a universal basis would avoid such negative impacts at moderate, if any, additional cost.
Summarized by Aurin Hasan, YPF Policy Research Team

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