Arup BanerjiArup BanerjiDirector, Social Protection and Labor, World Bank Budapest, May 7 2010

6 CCCTs?6 CCCTs?6 Conditions for Conditional Cash 6 Conditions for Conditional Cash TransfersTransfers

1. Structural poverty in families with children is a major concern

2. There is under-investment in core activities that can break the poverty cycle

3. There is shared political support for “mutual obligation” schemes

4. There is access to good quality services (schooling, clinics) available to the target groups

5. There is enough information to be able to target transparently and set entry/exit rules

6. There are no major overlaps with other cash transfers that may cause incentive ‘traps’

Demand for CCTs Supply of CCTs

Demand for CCTs: 3 Demand for CCTs: 3 QuestionsQuestionsDemand for CCTs: 3 Demand for CCTs: 3 QuestionsQuestions

1. Is structural poverty a major concern 1. Is structural poverty a major concern for families with children?for families with children?

Demand for CCTs: 3 Demand for CCTs: 3 QuestionsQuestionsDemand for CCTs: 3 Demand for CCTs: 3 QuestionsQuestions

Are families with children (more) Are families with children (more) at risk of poverty?at risk of poverty?

Risk of poverty of specific age Risk of poverty of specific age groups in Europegroups in Europe

Source: Lelkes, Medgyesi and Tóth

1. Is structural poverty a major concern 1. Is structural poverty a major concern for families with children?for families with children?

Demand for CCTs: 3 Demand for CCTs: 3 QuestionsQuestionsDemand for CCTs: 3 Demand for CCTs: 3 QuestionsQuestions

2. Is there under-investment in core 2. Is there under-investment in core activities that can break the poverty cycle activities that can break the poverty cycle ??

Potential under-investment in Potential under-investment in education (baselines for CCTs)education (baselines for CCTs)

Under-investment in secondary Under-investment in secondary education by Hungarian Romaeducation by Hungarian Roma

Source: Kertesi and Kezdi (2006)

% of cohort population, Hungary, 2003% of cohort population, Hungary, 2003

Returns to Schooling Returns to Schooling Matter?Matter?

1. Is structural poverty a major concern 1. Is structural poverty a major concern for families with children?for families with children?

Demand for CCTs: 3 Demand for CCTs: 3 QuestionsQuestionsDemand for CCTs: 3 Demand for CCTs: 3 QuestionsQuestions

2. Is there under-investment in core 2. Is there under-investment in core activities that can break the poverty cycle activities that can break the poverty cycle ??3. Is there shared political support for 3. Is there shared political support for “mutual obligation” schemes?“mutual obligation” schemes?

CCTs have addressed political CCTs have addressed political constraints to giving social transfers to constraints to giving social transfers to the poorthe poor Arguments about whether all

the poor are “deserving” led to the first “workfare” schemes in the US, which imposed a mutual obligation to work in exchange for welfare payments Modern European “activation”

policies also have “mutual obligation” characteristics as part of the social contract

The state is re-stated as a partner rather than a charity, and the poor as responsible rather than dependent In Mexico, Levy and Rodriguez

(2004) explicitly write: Shared responsibility and respect

inevitably imply a reciprocal effort by poor families to link the benefits they receive to concrete actions on their part … this is independent of technical considerations

Supply of CCTs: 3 Supply of CCTs: 3 QuestionsQuestionsSupply of CCTs: 3 Supply of CCTs: 3 QuestionsQuestions

4. Do the target groups have access to good quality and complementary services?

Supply of CCTs: 3 Supply of CCTs: 3 QuestionsQuestionsSupply of CCTs: 3 Supply of CCTs: 3 QuestionsQuestions

Final outcomes in CCTs are often Final outcomes in CCTs are often worse because of inadequate worse because of inadequate supplysupply Most CCT evaluations find little effect on learning

outcomes, even though school attendance increase Longer exposure to Oportunidades program doesn’t

improve learning scores (Behrman, Parker, Todd 2000 and 2005)

More years of schooling does not improve mathematics or language scores in Cambodia (Filmer and Schady 2009)

Most recently, overall school outcomes for elementary or middle school students in New York City’s Opportunity program did not increase despite increased school attendance

A major reason is the quality of schools (or clinics) may not be enough to improve outcomes just because of increased exposure

Distance may also matter – Oportunidades has less impact on children who live more than 4 km from a secondary school

Is there adequate supply of Is there adequate supply of quality schooling for quality schooling for disadvantaged groups?disadvantaged groups?

“… the Roma schools are considered by most teachers as undesirable working places, as teaching and education here requires above average effort and results in less success.

… Although the teachers’ work in schools where the majority of students are Roma requires a lot more than average effort, the wages are just as low as in any other school.”

Source: Havas, Kemény and Liskó [2002], quoted in Kertesi and Kézdi [2005]

2007. Source: OECD 2010

Some US welfare reforms have Some US welfare reforms have explicitly recognized multiple explicitly recognized multiple barriersbarriers The most successful example was the Minnesota Family

Independence Program (1994-98). Basic aim: To improve on the results on AFDC program in reducing poverty through work

Recognized, and addressed fact that welfare families faced multiple barriers: Inadequate education Poor work skills Little work experience Child care responsibilities Transportation constraints Physical, emotional, addiction issues

Therefore, paired employment opportunities with: Increased support for skills improvement Help with child care Health care

Compared to AFDC as usual, MFIP stayed on welfare longer, but were less likely to be poor when they left;

Children’s outcome (attendance, performance, and health) improved

CCT programs also address CCT programs also address complementary factorscomplementary factors Chile Solidario program has psycho-social support to

beneficiaries Social workers work with families on action plans covering 53

“minimum conditions” along 7 dimensions: Identification and legal documentation Family dynamics Education Health Housing Employment Income

In Mexico, Oportunidades conditions transfers on new or expecting parents participating in talks (pláticas) on parenting, hygiene and nutrition Evidence that these have encouraged better diets and improved

knowledge on health Hungary already has introduced pre-schooling support to

disadvantaged parents in January 2009, which will help

4. Do the target groups have access to good quality and complementary services?5. Is there enough information to be able to target transparently and set entry/exit rules?

Supply of CCTs: 3 Supply of CCTs: 3 QuestionsQuestionsSupply of CCTs: 3 Supply of CCTs: 3 QuestionsQuestions

Proxy means tests to target can Proxy means tests to target can avoid labor supply disincentivesavoid labor supply disincentives

Associating eligibility to income thresholds can create labor disincentives (as had historically been found in US TANF and AFDC)

Proxy means, which use household datasets to “predict” which households are poor based on observable “proxies”, can reduce the disincentive

However, devising proxies when poor and non-poor households are too similar in characteristics can be difficult

The poor are generally clustered The poor are generally clustered together in Eastern European together in Eastern European CountriesCountries

Source: Tóth (TÁRKI EUROPEAN SOCIAL REPORT) 2008

4. Do the target groups have access to good quality and complementary services?5. Is there enough information to be able to target transparently and set entry/exit rules?6. Are there no major overlaps with other cash transfers that may cause incentive ‘traps’?

Supply of CCTs: 3 Supply of CCTs: 3 QuestionsQuestionsSupply of CCTs: 3 Supply of CCTs: 3 QuestionsQuestions

Incentive effect of CCTs muddied if Incentive effect of CCTs muddied if too many programs transferring too many programs transferring resourcesresources In Mexico, part of the impetus to

introduce CCTs was to remove and substitute for 15 broad price subsidies Half of social funding went to subsidies for

tortillas and bread, used by non-poor households

Little coordination across programs, inefficient duplication of administration, and no evaluation of effectiveness

In 2006, cash transfer programs in In 2006, cash transfer programs in Hungary included:Hungary included:

Old age pension Disability benefits Maternity Allowance (Terhességi-

gyermekágyi segély): Maternity Grant (Anyasági

támogatás): Child Care Allowance

(Gyermekgondozási segély) Child Care Fee (Gyermekgondozási

díj) Child Raising Support:

(Gyermeknevelési támogatás) Family Allowance (Családi pótlék) Advance on maintenance payments

(Tartásdíj megelőlegezése) Regular Child Protection Benefit

(Rendszeres gyermekvédelmi támogatás)

Irregular Child Protection Benefit (Rendkívüli gyermekvédelmi támogatás)

Family tax allowance (Családi adókedvezmény)

Regular social benefit (Rendszeres szociális segély)

Nursing Fee (Ápolási díj) Old-age Allowance (Időskorúak

járadéka) Home Maintenance Support

(Lakásfenntartási támogatás) Debt-management Benefit

(Adósságcsökkentési támogatás) Public Health Benefit (Közgyógyellátás) Temporary Benefit (Átmeneti segély) Funeral Support (Temetési segély) Home renting support

(lakbértámogatás) Interest-free social loan (kamatmentes

szociális kölcsön) Meals support (étkezési támogatás) Local transportation support (helyi

utazási támogatás)Source: TARKI (2006)

Tax-welfare interactions also may Tax-welfare interactions also may give disincentives to workgive disincentives to work

6 CCCTs?6 CCCTs?6 Conditions for Conditional Cash 6 Conditions for Conditional Cash TransfersTransfers

1. Structural poverty in families with children is a major concern

2. There is under-investment in core activities that can break the poverty cycle

3. There is shared political support for “mutual obligation” schemes

4. There is access to good quality services (schooling, clinics) available to the target groups

5. There is enough information to be able to target transparently and set entry/exit rules

6. There are no major overlaps with other cash transfers that may cause incentive ‘traps’

Demand for CCTs Supply of CCTs

Further information available atwww.worldbank.org/socialprotection