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The Impact of Cash Transfers on Labor Supply
Gabriel Kreindler
(joint with Abhijit Banarjee, Rema Hanna, and Ben Olken)
J-PAL SEA Policy Conference on Social ProtectionJanuary 12, 2016
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• 52 countries with conditional cash transfers in 2013
• Up from 27 countries in 2008
• 119 countries with unconditional cash transfers in 2013
• Indonesia:• Program Keluarga Harapan (PKH) with 3.2 mil beneficiary families (2014)
• Bantuan Langsung Tunai (BLT) with 15.5 mil beneficiary HHs (2013)
• Bantuan Siswa Miskin (BSM) with 11.13m beneficiaries (2014)
• Bantuan Langsung Sementara Masyarakat (BLSM)
Cash Transfers Important Worldwide
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Documented Positive Effects of Cash Transfers
• Income support and poverty reduction (Fiszbein and Schady 2009)
• Increase school attendance (Schultz 2004, Glewwe and Olinto 2004, Maluccio and Flores 2005)
• Boost early childhood cognitive development (Macours, Schady, and Vakis 2012)
• Decrease child labor (Edmonds and Schady 2012, Skoufi as and Parker 2001, Maluccio and Flores 2005)
• Increase use of health services(Gertler 2000, Gertler 2004, Attanasio et al. 2005)
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The Effects of Cash Transfers in Indonesia
World Bank RCT evaluation of PKH (2011):
• Increased food consumption
• No change in temptation goods
• Increased usage of primary healthcare services (natal check-ups, immunizations, etc.)
• Little impact on education behavior
• No effect on child labor.
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Potential Negative Effects
1. Do cash transfer recipients work less?
2. Do recipients spend the money on temptation goods? (tobacco, alcohol, sugary drinks)
• World Bank meta-analisys of 19 programs: no effect(Evans and Popova 2014)
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Do Transfers Discourage or Encourage Work?
• Reasons to discourage work:
• Recipients can afford to work less
• Working may lower chance to get benefits
• Reasons to encourage work:
• Nutritional poverty traps
• Can be used for investments
• Ability to hire child care
• Ability to fund seasonal migration
• Draw on rigorous RCT evidence from Indonesia and worldwide.
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Results from 7 Randomized StudiesDo cash transfer programs discourage work?
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Evidence from Indonesia and 5 other countries
• PKH in Indonesia
• Each study is a randomized control trial (RCT).
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Mexico Honduras
Nicaragua
Morocco
Indonesia(PKH program)
Philippines
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Cash transfers are large and last several years
• Across the seven programs:
• Transfer size 4-30% of household consumption.
• Households receive transfers for 2-9 years.
• PKH program:
• ~11% of household consumption
• Disbursed for 6 years
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PKH recipients work as much as non-recipients
Data from SUSENAS 2013. Restricted to 162 kabupatens with >1% PKH recipients. Households with 5% highest expenditure excluded. (N=88,138) 10
0%
50%
100%
Household head Household head spouse
Fraction Working
Non-recipients PKH recipients
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Data from SUSENAS 2013. Restricted to kabupatens with >1% PKH recipients. Households with 5% highest expenditure excluded. (N=88,138) 11
0
10
20
30
40
Household head Household head spouse
Hours of work per week
Non-recipients PKH recipients
PKH recipients work as much as non-recipients
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Randomized evaluations ensure that detected
outcomes are caused by the policy or program
• When comparing program impacts between people that
do or do not receive a program, outcomes may be due to
differences between the people, not the program itself.
• Randomized evaluations overcome this challenge:
• Randomly assign program to different areas by lottery
• Some areas randomly assigned as “Program Group,” others
to “Comparison Group”
• Areas in the program and comparison groups are
statistically equivalent before the experiment
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Program
Group
Groups are statistically identical before program
Comparison
Group
=
Any differences at follow-up can be attributed to program
Randomized evaluations ensure that detected
outcomes are caused by the policy or program
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For almost every program, the effect of transfers on work is not distinguishable from zero
14
0%
20%
40%
60%
80%
100%
Honduras(4%)
Morocco(5%)
Philippines(11%)
Mexico PAL(11.5%)
IndonesiaPKH
(11%)
Nicaragua(20%)
MexicoProgresa
(20%)
Program Country (transfer size as % of household consumption)
Fraction who Worked Last Week
Comparison Group Program Group
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Pooling all the studies: No impact on whether the recipient works
• A cash transfer program decreases the fraction working by 0.6 percentage points (not significant).
• Effect not distinguishable from zero. 95% confidence interval: -1.6% to 0.4%.
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Indonesia: PKH did not significantly affect work
• Difference not distinguishable from zero. (N=80,851)
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55%
60%
65%
Before the program After the program
Fraction who Worked Last Week
Comparison group
Program group
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Indonesia: Larger transfers did not affect work
17
50%
55%
60%
65%
70%
1st quintile(<6%)
2nd quintile(6-8%)
3rd quintile(8-11%)
4th quintile(11-15%)
5th quintile(>15%)
Transfer Size Quintile (% of household consumption)
Fraction who Worked Last Week
ComparisonGroup
Programgroup
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Cash transfers do not lead to fewer hours per day
18
0
5
10
15
20
25
30
Honduras(4%)
Morocco(5%)
Philippines(11%)
Mexico PAL(11.5%)
Nicaragua(20%)
MexicoProgresa
(20%)
Hours of Work per Week
Comparison Group Program Group
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Pooling all the studies:No impact on how long recipient works
• A cash transfer program leads recipients to work 15 minutes less per week (not significant).
• This effect is not distinguishable from zero. The 95% confidence interval is between one hour less and 30 minutes more per week.
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• How does higher household consumption decrease the expected amount of PKH transfer received?
• Relevant numbers:
• Average yearly benefit 2.1mil IDR (2013)
• Approx. 11% of beneficiary yearly consumption
• 6 years of benefits
• 4.3% of population receive PKH
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Indonesia: The implicit PKH tax on consumption
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The implicit PKH tax on consumption is small
• A household with 1mil IDR higher yearly consumption will receive, on average, 40k IDR less in benefits over 6 years.
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Conclusion
• Despite stereotypes, the poor recipients of social benefits work as much as the rest of the population.
• Transfer do not induce recipients to work less (nor more). True in Indonesia and worldwide.
• Cash transfers have positive impacts:
• Income support
• Education
• Health service utilization
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Terima kasih!
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Sources
• World Bank State of the Safety Net
• World Bank (2011), Program Keluarga Harapan: Main Findings from the Impact Evaluation of Indonesia’s Pilot
Household Conditional Cash Transfer Program.
• World Bank (2009), Conditional Cash Transfers – Reducting Present and Future Poverty, A World Bank Policy
Research Report.
• CCTs on income support and poverty reduction (Fiszbein and Schady 2009)
• CCTs on health services: (Gertler 2000, Gertler 2004, Attanasio et al. 2005)
• CCTs on school enrollment and attendance (Schultz 2004, Glewwe and Olinto 2004, Maluccio and Flores 2005)
• CCTs on early childhood cognitive development (Macours, Schady, and Vakis 2012)
• CCTs on child labor: Edmonds and Schady 2012, Skoufi as and Parker 2001, Maluccio and Flores 2005.
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Impact of transfers on work (men)
25
0%
20%
40%
60%
80%
100%
Honduras(4%)
Morocco(5%)
Philippines(11%)
Mexico PAL(11.5%)
Indonesia(11%)
Nicaragua(20%)
MexicoProgresa
(20%)
Worked Last Week (Men)
Comparison Group Program Group
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Impact of transfers on work (women)
26
0%
20%
40%
60%
80%
100%
Honduras(4%)
Morocco(5%)
Philippines(11%)
Mexico PAL(11.5%)
Indonesia(11%)
Nicaragua(20%)
MexicoProgresa
(20%)
Worked Last Week (Women)
Comparison Group Program Group
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Impact of transfers on hours per week (men)
27
0
5
10
15
20
25
30
35
40
45
Honduras(4%)
Morocco(5%)
Philippines(11%)
Mexico PAL(11.5%)
Indonesia(11%)
Nicaragua(20%)
MexicoProgresa
(20%)
Hours Worked per Week (Men)
Comparison Group Program Group
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Impact of transfers on hours per week (women)
28
0
2
4
6
8
10
12
14
16
18
Honduras(4%)
Morocco(5%)
Philippines(11%)
Mexico PAL(11.5%)
Indonesia(11%)
Nicaragua(20%)
MexicoProgresa
(20%)
Hours Worked per Week (Women)
Comparison Group Program Group
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Follow-up data collected 1.5 years after program started
• In Indonesia: data collected after 2 years and 4 months.
29
0
1
2
3
4
0.0 0.5 1.0 1.5 2.0 2.5 3.0
Freq
ue
ncy
Years after Implementation
Follow-up Timing