Barrientos and Nino-Zarazua (2011) Social Transfers and Chronic Poverty. Objectives, Design, Reach and Impact

8/7/2019 Barrientos and Nino-Zarazua (2011) Social Transfers and Chronic Poverty. Objectives, Design, Reach and Impact

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C h r o n i c P o v e r

t y R e s e a r c h C e n t r e

Social transfersand chronic povertyObjectives, design, reach and impact

Armando BarrientosMiguel Nio-Zaraza


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Social transfers and poverty:Objectives, design, reach and impact

This report is one of a series of policy analysis outputs from the CPRC. Others focus on gender, growth, and fragilestates, and can be donwloaded from www.chronicpoverty.org .

This report is wri en by Armado Barrientos and Miguel Nio-Zaraza.

Armando Barrientos leads the Insecurity, Risk and Vulnerability themes at the Chronic Poverty Research Centre.He is Professor of Poverty and Social Justice and Director of Research at the Brooks World Poverty Institute(BWPI) at the University of Manchester in the UK.

Miguel Nio-Zaraza is a Honorary Research Fellow at the Brookes World Poverty Institute (BWPI). He holds aPhD in Economics from the University of She eld and an MSc in International Development from Bath University.

This document is an output from the Chronic Poverty Research Centre (CPRC), which is funded by UKaid from the UKDepartment for International Development (DFID) for the bene t of developing countries. The views expressed are notnecessarily those of DFID. The CPRC gratefully acknowledges DFIDs support.

Cover photos Miguel Nio-Zaraza .

Since the early years of this century, the Chronic Poverty Research Centre (CPRC) has been at the forefront ofresearching social transfers and providing evidence that it can work as an approach to tackle chronic and extremepoverty. This report conveniently draws together the threads of CPRC and other work and lays out ways in which,and the degree to which, social transfers address what is now acknowledged to be a signi cant issue: the fact thathundreds of millions of people are poor over long periods, their whole lives, and pass on their poverty to theirchildren, or die prematurely.

The growing popularity of transfers re ects the now very long-standing recognition that the high-risk environmentfaced by poor and vulnerable people means that their development is greatly constrained. Savings, business

development, educating children, and making use of health services, are all compromised by the risk environment,and the inadequate bu ers for people who have to deal with risks. Social transfers are seen here as a developmentalintervention, not a safety net, as they contribute to interrupting long-term and inter-generational poverty. Theyare not a magic bullet as people do not just need a transfer to escape poverty and stay out of it, but also needan enabling economic environment that provides opportunities for decent work and self-employment, physicalinfrastructure, and functional, accessible and good quality services. But social transfers are a good start. It can addto the pressure on governments to provide quality public services, and at least, the depth of poverty is reduced bya transfer.

We hope this report will be useful to policy makers in presidents and prime ministers o ces, ministries of nanceand planning, as well as the ministries and agencies charged with developing or re ning social transfer programmes.It will also be of interest to donor agencies supporting such policies and programmes.

Andrew Shepherd

Director, CPRC


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Executive summary

In the rst decade of the new century, social protectionhas emerged as a new paradigm for antipovertypolicy thinking in the global South. Social protectionprogrammes are currently reaching, and helpingchange, the lives of more than 860 million peopleworldwide. This re ects an emerging consensus thateradicating world poverty requires economic growth, basic service provision and social protection. It alsore ects improvements in knowledge on the nature andcauses of poverty.

In this report, the focus is on social assistance, andfollows a new typology that distinguishes betweenprogrammes that provide pure income transfers;

programmes that provide income transfers plus policyinterventions aimed at enhancing human, nancialand physical assets; and integrated poverty reduction programmes. The report pays special a ention to theextent to which emerging social assistance programmesin the South address chronic poverty, as the la ersubject remains a major challenge for antipoverty policyinterventions. Addressing this challenge requires thatsocial assistance programmes succeed in reaching out tothe poorest and facilitate investment in their productive

capacity. The report focuses on three policy questions:rst, do programme objectives address chronicpoverty? Second, are programme design features theidenti cation and selection of bene ciaries, deliverymechanisms and complementary interventions e ective in reaching chronically poor households?And third, do social assistance programmes bene t thechronically poor?

Addressing chronic poverty with social

assistanceSection 2 tackles the rst policy question and examinesprogramme objectives across a range of countries. It

focuses on two channels through which social transfersaddress chronic poverty: rst, by promoting longer-term human capital investment, especially throughschooling, healthcare and nutritional complements, andsecond, by protecting household assets and facilitatingasset building. To the extent that social assistance aimsto improve human capital and asset among poor andpoorest households, it becomes directly relevant to thereduction of chronic poverty.

Facilitating human capital investment

In particular, Section 2.1 discusses the extent to whichtransfer programmes aim at improving households

productive capacity through human capital investment.Human development programmes in Latin America (alsoreferred to in the literature as conditional cash transfersor CCTs) explicitly aim at promoting investments inhuman capital. This objective is critical to help breakthe intergenerational persistence of poverty. The humandevelopment approach to social assistance has beenexpanding rapidly in Latin America and beyond, withover 30 countries having large-scale programmes inplace, including Bangladesh, Indonesia and Turkey.

A focus on human development also appears to besigni cant in pilot schemes in Kenya, Malawi, Ghanaand Zambia; and in pilot projects at an implementationstage in Nigeria, Liberia, Uganda and Tanzania.

The justi cation for an emphasis on humandevelopment is based on empirical evidence showingthat poor nutrition, poor health and limited schoolingcan lead to a vicious cycle of poverty. Social assistance becomes critical, as income transfers can relax households budget constraints whilst encouraging human capital

investment. The complementarities between nutrition,health and education seem to contribute to the expansionof social transfers with a human development focus.


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Protecting and rebuilding physical assets

Section 2.2 focuses on the underlying mechanismsthrough which social transfers can help households

protect and rebuild their nancial and physical assets.When poor people are exposed to idiosyncratic and/orcovariate risks, they often resort to coping strategies that,although they may be e ective in dealing with the short-term e ects of these risks, can have devastating long-term impacts on households. Social transfers can thusgenerate a double dividend if they help poor people toprotect and build physical assets.

Some programmes have been explicitly designed toprovide income support to chronically food-insecure

households in a way that prevents asset depletion atthe household level, whilst building community assetsthrough labour-intensive public works components(e.g. Ethiopias Productive Safety Net Programme).Other programmes provide comprehensive assistancepackages that have the speci c objective of rebuilding andstrengthening the productive capacity of extremely poorhouseholds, through the provision of assets and incometransfers in combination with health interventions andcredit accessibility (e.g. Bangladeshi BRACs Targeting

the Ultra Poor Programme).

Does social assistance reach out to thechronically poor?

Section 3 looks into the design features and programmeimplementation issues that are relevant to the secondpolicy question of this report, i.e. to what extent theidenti cation and selection of bene ciaries, deliverymechanisms, and complementary interventions, aree ective in addressing persistent deprivation.

Tackling chronic poverty by addressing the

extremely poor

A feature of the recent expansion of social transfersin developing countries is that they focus on theextremely poor and most vulnerable people in society.Section 3.1 discusses the issue of whether, and to whatextent, a focus on the extremely poor can contributeto tackling chronic poverty. CPRC work suggests that

a high proportion of chronically poor households arein extreme poverty. The focus on extreme poverty istherefore likely to cover a signi cant proportion of

chronically poor households, although this may dependon structural and distributional factors, such as thegrowth rate of per capita consumption, and the depthof the poverty gap. There is also an important political

economy dimension associated with social assistancefocusing on the extremely poor.

Identi cation and selection of programme

bene ciaries

Section 3.2 analyses the e ectiveness of methods ofidenti cation and selectionof bene ciaries in reaching outto the chronically poor. The report nds that categoricaltargeting has advantages at the identi cation stage, as thefocus on groups (children, older people, unemployed,etc.) that are regarded as highly vulnerable and thereforeperceived to be entitled to receive support. In somecontexts, categories of people may correlate closely withthe chronically poor, but this is an exception, ratherthan the rule. Geographical methods of identi cation,combined with means-tests, proxy-means tests orcommunity-based procedures, improve the accuracyand e ciency of delivery systems and strengthene ectiveness in tackling chronic poverty, althoughexclusion and inclusion errors may remain. Someprogrammes adopt indirect measures of self-selection.These are by and large the main selection strategy adopted by workfare programmes and employment guaranteeschemes. In most cases though, workfare programmesseem inappropriate for addressing chronic poverty, astheir design features are intended to deal with transitorydeprivation. Increasingly, social assistance relies on acombination of strategies to select bene ciaries.

Coverage, scale and transfer size

While programme design features have dominatedthe discussion of social assistance, coverage, scaleand transfer size are of much greater signi cance inaddressing chronic poverty. Section 3.3 focuses on theseissues. The rapid introduction of transfer programmes inthe last decade has resulted in a steep rise in the globalcoverage of social assistance in the developing world.All in all, di erent types of transfers now reach in excessof 190 million poor households, with approximately 860

million people currently bene ting directly or indirectlyfrom social assistance. This gure could potentiallyincrease up to one billion if countries currently running


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iiiSocial transfers and chronic poverty: Objectives, design, research and impact

pilot programmes are able to roll them out to nationalscale. This means that social transfer programmes have become the most important policy instrument againstextreme and persistent deprivation at the present time.

For the most part, the share of the population covered by transfer programmes varies from country to country.This ranges from just a fraction of those in povertyin most sub-Saharan African countries, to nearly 25percent of the total population in Brazil and Mexico,and 50 percent of households in South Africa. Scale aswell as transfer levels are functions of both the extent ofpoverty incidence and the budgetary and administrativecapacity of governments. Most country programmesallocate less than one percent of gross domestic product

(GDP) to social assistance.

Regularity and duration of support

Section 3.4 pays a ention to the role that the regularity,predictability and reliability of transfers play in providinga minimum level of security, essential for longer-terminvestment decisions. In terms of transfer duration,the report nds that there is no rule of thumb to guidepolicy, as the optimal length of assistance maximisingthe impact on chronic poverty may be contingent onthe targeted population and on the socio-economiccontext. Households facing chronic poverty are morelikely to require a longer time window of support totackle accumulated de cits in productive capacity and basic capability. The timing of interventions is alsoimportant. Nutritional and health interventions in earlylife are signi cant determinants of improving peoplesproductive capacity in adulthood.

Do social transfers reduce chronic poverty?Section 4 assesses the available evidence on the impactsof social assistance, with a view to gauging their capacityto reduce chronic poverty, which relates to the thirdpolicy question of the report. A growing body of researchcon rms that social transfers are e ective instrumentsfor enhancing human capital. The discussion on thatliterature is divided into separate dimensions: Section4.1.1 discusses the main impact evidence on nutrition;Section 4.1.2 focuses on health status; whereas Section

4.1.3 analyses the impact evidence on schooling.

Impacts on nutrition

Nutrition plays a central role in enhancing humandevelopment. A well-balanced diet is the foundation

for a healthy living and a central input for labourproductivity. Evidence on improvements in nutritionalstatus as a result of transfer programmes is strong acrosscountries and throughout di erent types of programmes.Overall, studies con rm a direct link between incometransfers and food consumption, where evidence isparticularly strong in terms of improvements in childnutrition. These results point to an important dimensionthrough which social transfers impact human capital,improve childrens lifetime opportunities and help to

tackle long-term chronic poverty.Impacts on health

By design, some transfer programmes have the objectiveof improving access to, and utilisation of, health services.Other programmes, however, may a ect householdhealth indirectly, through the supplementation of incomeand associated improvements in consumption. All inall, the report nds that ensuring that children enjoygood health during early age is critical for educational

achievements, future economic and social opportunitiesand their overall ability to escape from inter-generationalpoverty traps.

Impacts on schooling

The importance of reviewing the impact evidence ofsocial transfers on schooling comes from the strongcorrelation between schooling and increased labourproductivity and income. Indeed, the design of manysocial transfers has been shaped by the knowledge thatreducing persistent poverty requires e ective policyinstruments to improve schooling amongst the extremelyand chronically poor. Empirical evidence from humandevelopment programmes in Latin America shows thatchildrens schooling has improved through speci cprogramme design features that include improvementsin service supply and co-responsibilities. Butimprovements in schooling are not restricted to humandevelopment programmes, as pure income transfersin Africa also report important impacts on childrensschooling. The extent to which these changes translateinto improvements in knowledge and reduction in


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intergenerational transmissions of poverty is, however,more di cult to con rm at present.

Asset protection and asset accumulation

Other social transfers seek to protect households assetsagainst idiosyncratic and covariate shocks and/or supporthouseholds e orts to accumulate nancial and physicalassets. Section 4.2 reviews the literature with regard tothese subjects. The report nds that the extent to whichtransfer programmes support household productivecapacity depends on intra-household dynamics ofresource allocation, and design features that facilitateasset protection and asset accumulation. And althoughsocial transfers seem to be e ective in protecting andpromoting asset accumulation, the impact literatureon this subject is limited to a few programmes and isnot systematic across the board. Statistically signi cantimpacts reported from human development programmesand social pension schemes appear to be simply a by-product of their income component, and not an explicitprogramme objective. The capacity of social transfersin facilitating asset protection and asset accumulationis therefore likely to vary across programmes, targetgroups and socio-economic environments.

Conclusions and policy implications

Finally, Section 5 concludes by noting the policy lessonsemerging from the report. Overall, it nds that manysocial assistance programmes recently introduced indeveloping countries aim, directly or indirectly, totackle chronic poverty. The extent to which programmesaim to strengthen the productive capacity of householdsin poverty and extreme poverty is a key indicatorof whether these programmes will address chronicpoverty. The report also identi ed several programmedesign factors with important implications for theextent to which social assistance addresses chronicpoverty. The discussion notes that current knowledgeon the outcomes of social assistance encourages strongexpectations on its potential role in addressing long-termpoverty, but that this can only be con rmed when currentprogrammes reach maturity. This draws a ention to theimportance of extending the scope, depth and especiallylength of academic research into these relevant policyquestions. The experience of CPRC work shows thatpolicy dialogue between the research community bothnational and international and bilaterals, multilateralsand national governments is paramount to continueadvancing knowledge on the area of chronic povertyin order to increase poverty impact and improve policyand practice.


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Table of contents

Executive summary i

1 Introduction 1

2 Addressing chronic poverty with social transfers 3

2.1 Facilitating human capital investment 4

2.2 Protecting and rebuilding physical assets 6

3 How do social transfers reach out to the chronically poor? 9

3.1 Tackling chronic poverty by addressing the extremely poor 9

3.2 Identification and selection of programme beneficiaries 10

3.2.1 Direct measures for identification and selection of beneficiaries 14

3.2.2 Indirect measures of self-selection 15

3.3 Coverage, scale and transfer size 16

3.4 Regularity and duration of support 18

4 Do social transfers reduce chronic poverty? 19

4.1 Enhancing human capital 19

4.1.1 Impacts on nutrition 19

4.1.2 Impacts on health 21

4.1.3 Impacts on schooling 22

4.2 Asset protection and asset accumulation 23

5 Conclusions and policy implications 25

Endnotes and references 29

Tables

Table 1: A typology of social assistance programmes in developing countries

with selected examples worldwide in terms of outreach 2

Table 2: Methods of identification and selection of beneficiaries of selected social transfer programmes 12

Table 3: Exclusion and inclusion errors of selection 15Table 4: Global coverage of social assistance in developing countries 17


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Figures

Figure 1: Simulated future earnings from increased years of schooling amongst

beneficiary children of social transfers 5

Figure 2: Asset traps and the circle of chronic poverty 7

Figure 3: Marginal value of an income transfer relative to household welfare 10

Figure 4: Impact of social transfers on school enrolment 22

Boxes

Box 1: Synthetic measures of chronic poverty 3

Box 2: Focusing on the poorest from a social justice perspective 10


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In the rst decade of the new century, social protectionhas emerged as a new paradigm shifting antipovertypolicy thinking in the global South from conventionalapproaches of food aid, subsidies and other forms ofsafety nets to regular and predictable forms of socialassistance. The rapid growth of antipoverty programmes,described elsewhere as a quiet revolution, 1 has enabledthem to reach, and help change, the lives of more than860 million people worldwide. This re ects an emergingconsensus that eradicating world poverty requireseconomic growth, basic service provision and socialprotection. It also re ects a shift in the conventionalwisdom on the nature and causes of poverty.

In this report, the discussion on social protection isundertaken with an explicit focus on social assistance,comprising tax- nanced non-contributory programmesaddressing poverty. The most signi cant changes tosocial protection systems in developing countries overthe last decade have focused on social assistance and,much less so, on social insurance and on passive andactive labour market interventions.

Chronic poverty remains a major challenge in theworld. Recent estimates suggest that between 320 and

443 million people are trapped in a state of persistentdeprivation. 2 Addressing this challenge requires thatsocial assistance programmes succeed in reachingout to the poorest and facilitate social investmentin their capacity to climb out of poverty traps. Thisreport examines the extent to which social assistanceprogrammes in developing countries address chronicpoverty. The report focuses on three main policyquestions:

Do programme objectives tackle chronic poverty?1. In

order to answer this question, the report focuseson channels through which transfer programmesaddress chronic poverty: rst, by promoting human

capital investment, especially through schooling,healthcare and nutritional complements, and second, by protecting household assets and facilitating asset building.

Are programme design features, for example, the2.identi cation and selection of bene ciaries, deliverymechanisms and complementary interventions, e ective inaddressing persistent deprivation? The report examinesthe extent to which the main design features of socialassistance programmes and their implementationenables them to reach those most likelyto su er fromchronic poverty.

Do social assistance programmes bene t the chronically3. poor? The report assesses the available evidence onthe impact of these programmes on chronically poorpeople.

Social assistance programmes in developing countriesshow considerable diversity in terms of objectives,design and reach. The report follows a new typology,distinguishing between programmes that provide pureincome transfers; programmes that provide income transfers plus policy interventions aimed at enhancing human,

nancial and physical assets; and integrated povertyreduction programmes. This new typology has severaladvantages. The typology is a more accurate templatefor identifying key design features that are relevant inthe context of addressing poverty and vulnerability.It also provides, as discussed below in Section 2 , agood entry point into the conceptual and theoreticalunderpinnings of social assistance programmes indeveloping countries. The three programme types re ectdistinctive understandings of poverty: poverty as lack of

income; poverty as severe de cits in human capital andassets; and poverty as a multidimensional phenomenon(see Table 1).

1 Introduction


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complementarities between these dimensions help toexplain the limited capacity of poor people to generateadequate income. To the extent that social assistanceaddresses these factors, it becomes relevant to thereduction of chronic poverty. Section 2.1 discusses theextent to which transfer programmes aim at improvinghouseholds productive capacity through human capitalinvestment, whereas Section 2.2 focuses on whethersocial transfers help households to protect and rebuild

their nancial and physical assets.

2.1 Facilitating human capital investment

Human development programmes in Latin America(also referred to in the literature as conditional cashtransfers or CCTs) combine income transfers withpreferential access to health or education services.Human development programmes explicitly aimat both reducing extreme poverty and promotinginvestments in human capital. This second objective iscritical to help break the intergenerational persistence ofpoverty. The balance between these two goals, reducingcurrent poverty and future poverty, varies across

programmes. To the extent that reducing future povertyis a programme objective, social assistance programmesimplicitly address chronic poverty.

One of the best known, and oldest, humandevelopment programmes, Mexicos Progresa-Oportunidades , places a strong emphasis on the objectiveof reducing the intergenerational persistence of poverty.Progresa-Oportunidades aims to reduce chronic povertythrough a strong focus on the human development of

children. Income transfers are conditional on childrensenrolment and minimum a endance at primary andsecondary grades. Progresa-Oportunidades also includesconditions relating to the use of preventive health careservices by household members, especially for expectantmothers and children from birth to age ve or six, whichare deemed to be critical for enhancing childrens futureproductive capacity. 13

Similarly, Brazils Bolsa Familia , the largest transferprogramme in Latin America, builds on two keyobjectives relevant to combating chronic poverty: rst,to reduce hunger and poverty through income transfers;and second, to tackle long-term deprivation through

Bangladesh Miguel Nio-Zaraza


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5Social transfers and chronic poverty: Objectives, design, research and impact

access to education, health and nutrition services. 14 Among other country programmes adopting a long-term perspective on human development are ColombiasFamilias en Accin and Ecuadors Bono de Desarrollo

Humano . These programmes complement the income ofextremely poor households with human developmentinterventions with the explicit objective of promotinghuman capital formation.

In a recent report, the World Bank reports that thehuman development approach to social assistance has been expanding rapidly in Latin America and beyond,with over 30 countries with large-scale programmes inplace, including Bangladesh, Indonesia, and Turkey. 15 Barrientos, Nio-Zaraza and Maitrot 16 also report that

a number of human development pilot schemes have been introduced in Asia, Africa and Latin America. Afocus on human development appears to be signi cantin pilot schemes in Kenya, Malawi, Ghana and Zambia;and in pilots at an implementation stage in Nigeria,Liberia, Uganda and Tanzania.

The justi cation for an emphasis on humandevelopment is based on empirical evidence showingthe limitations and constraints faced by poor householdsplanning to invest in human capital. This is especially

the case where credit markets are fragmented. Poornutrition, poor health and limited schooling areassociated with low labour productivity. In turn, lowlabour productivity translates into low incomes, which

often lead to a vicious cycle of poverty and deprivation.In low-income countries, it is reported that 43 percent ofchildren aged nought to ve are underweight and theprevalence of malnutrition is often two to three times

higher among the poorest income quintile. 17 There is alsosystematic evidence that chronically poor households areless likely to be in a position to support their childrenseducation. 18 Children who do not have the opportunityto complete their basic education are likely to facelifetime of poverty 19. Vicious cycles are referred to inthe literature of poverty as poverty traps. More than100 years ago, Seebohm Rowntree documented these inhis detailed poverty study of Yor k:

The position of these [poor] workmen is one

of peculiar hopelessness. Their un tness meanslow wages, low wages means insu cient food,insu cient food un tness for labour, so that thevicious circle is complete. The children of suchparents have to share their privations, and evenif healthy when born, the lack of su cient foodsoon tells upon them. Thus they often grow upweak and diseased, and so tend to perpetuate therace of the un t. 20

In that context, social assistance becomes critical, asincome transfer can relax households budget constraintswhilst encouraging human capital investment. Socialtransfers allow households to increase the quantity andquality of food they consume. They can also facilitateintra-household time reallocation so that children cango to school (see Section 2.3 below). More schooling and

Figure 1: Simulated future earnings from increased years ofschooling amongst bene ciary children of social transfers


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be er health and nutrition for children will translateinto greater future productivity and higher incomes inadulthood, which are required to break poverty trapsand reduce the incidence of chronic poverty. 21

Impact evaluations of large-scale social assistanceprogrammes focused on human development indicatethat programme objectives will lead to improvementsin future labour productivity. Children who receivedsupport from the earliest transfer programmes, e.g.Mexicos Progresa-Oportunidades and Brazils BolsaFamilia , are just beginning to enter the labour market.A handful of studies looking into the observed long-term e ects of Mexicos Progresa-Oportunidades throwsome light on this point. 22 In particular, Rodriguez

Oreggia and Freije Rodriguez assess the impact onemployment, wages and intergenerational mobility. 23 They nd a positive e ect on income for young male bene ciaries that completed primary and secondaryeducation; although they also point out that, due toinformational constraints, it is di cult to draw de niteconclusions about the e ects of Progresa-Oportunidades on employment and intergeneration mobility.

Some studies have opted to simulate the impacts onfuture earnings of increased years of schooling amongst

child bene ciaries of social transfers. For example,in their study of the school vouchers programme(PACES) in Colombia, Angrist et al nd that returningto an additional 0.12 years of schooling would raiseearnings amongst programme bene ciaries by about 1.2percentage points. 24 In Nicaragua, Morley and Coadyestimate the future incomes of workers who receivedincome support from Mexicos Progresa-Oportunidades and Nicaraguas Red de Proteccin Social.25 They nd thatthe present value of future earnings would go up as theresult of participation in the programmes (see Figure 1).Their ndings validate previous simulations of MexicosProgresa that suggest that an increase of 0.66 years ofschooling would lead to an increase of eight percent infuture wages. 26

The complementarities between nutrition, healthand education, and the spillover e ects and positiveexternalities emerging in labour, commodities and creditmarkets from the strengthening of these dimensions ofwellbeing, seem to have contributed to the expansion,in terms of scale and global coverage, of social transferswith a human development focus. 27 The following sectionturns to the channels through which social transfers

address chronic poverty, paying particular a ention totheir role in protecting and facilitating physical assets building.

2.2 Protecting and rebuilding physical assets

Social transfers can generate a double dividend if theyhelp the poor protect and build physical assets. Whenthe poor are exposed to idiosyncratic and/or covariaterisks that threaten their livelihoods, they often resort tocoping strategies that, although they may be e ective indealing with the short-term e ects of these risks, can havedevastating long-term impacts on households. By sellingtheir ca le, land, tools or machinery, households reduce

their productive and earning capacity, making theirprospects of future recovery rather grim. Zimmermanand Carter, 28 and Carter and Barre 29 have pointed outthat those households which fall below a critical asset (orMicawber 30) threshold would remain trapped in a lowlevel of productive capacity and su er from persistentdeprivation unless they receive support from externalinterventions that help them to escape from the hole inwhich they are trapped.

This is illustrated in Figure 2. In the absence of

insurance markets, a household will resort to its assetsto cope with the negative e ects of idiosyncratic orcovariate shock. That coping strategy will result in adepletion of assets and a lower productivity and earningcapacity that would ultimately lead to a vicious circleof poverty. This is depicted by the inner circular andincreasingly intense red arrows. Social transfers can actin that context as both an ex ante protective mechanism,complementary to indigenous forms of insurance thatprevent households from taking actions that diminish

their productive capacity, and as an ex post promotivedevice that supports households building and/orrebuilding their assets to strengthen their productivecapacity. This is illustrated by the outer squared andincreasingly brightening blue arrows that lead to thepoverty exit.

In Ethiopia, the Productive Safety Net Programmehas been explicitly designed to provide income supportto chronically food-insecure households in a way thatprevents asset depletion at the household level while

building community assets through its labour-intensivepublic works component. 31 In India, the NationalEmployment Guarantee Scheme provides a guarantee of


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100 days of wage employment per year to unemployedunskilled workers. The programme is reported to be e ective in reducing levels of anxiety amongstparticipants. This provides a sense of security fromwhich the participating households bene t, irrespectiveof whether they enrol temporarily or repeatedly in thescheme. 32

As pointed out earlier, the role of social transfersin promoting households asset building is equallyimportant. BRACs Challenging the Frontiers ofPoverty Reduction/Targeting the Ultra Poor providesa comprehensive assistance package that has thespeci c objective of rebuilding and strengthening theproductive capacity of extremely poor households,through the provision of assets and income transfersin combination with health interventions and creditaccessibility. 33 The rationale of linking assets and incometransfers with credit accessibility relies on a growing body of theoretical and empirical work that looks intothe connection between credit market imperfectionsand sub-optimal levels of capital investment. 34 Poorhouseholds with low capital endowments are unable to

nance pro table ventures with either their own assetsor through borrowing at optimal scale. Risk-averse behaviour reported in empirical work is driven by theenvironments of uncertainty and risk under which poorhouseholds subsist; 35 those conditions exacerbate thesub-optimal level of investment that leads to productionine ciencies and, in extreme situations, poverty traps.

Bene ciaries of social transfers appear to invest partof their income transfer in productive activities. A studyof Bolivias social pension Bonosol(later renamed as BonoDignidad) estimates that among pension bene ciaries inrural areas, overall consumption rose by twice the amountof the bene t, suggesting that improved householdproduction was facilitated by the transfer. 36 Similar

ndings are observed amongst bene ciary householdsof social pensions in Namibia 37 and Brazil, 38 as well asin human development programmes, such as MexicosProgresa-Oportunidades.39 These and other studies provideimportant insights into the factors and conditions underwhich social transfers stimulate investment decisions,highlighting the fact that the capacity of social transfersto lift credit constraints is likely to vary across di erentsocio-economic environments, types of programmesand target groups.

For most programmes, the improved creditaccessibility observed in transfer programmes is a by-product of their income component, and not a result ofan explicit design feature. The length, size and overallpackage of support may also play a role in allowinghouseholds to make investment decisions. This sectionhas discussed di erent channels through which socialtransfers address the factors associated with chronicpoverty. The following section focuses on how, to reachout to the chronically poor, i.e. what measures socialtransfers adopt.

Figure 2: Asset traps and the circle of chronic poverty


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3 How do social transfers reachout to the chronically poor?

A feature of the recent expansion of social transfersin developing countries is the extent to which theyare focused on the extremely poor and most vulnerablepeople in society. Section 3.1 focuses on the issue ofwhether, and to what extent, a focus on the extremelypoor can contribute to tackling chronic poverty,whereas in the remaining sections, a ention shifts to themethods of identi cation and selection of bene ciaries.Bene ciary selection, alongside coverage, transfer size,regularity and length of programme support, can play asigni cant role in determining the e ectiveness of socialtransfers in addressing chronic poverty.

3.1 Tackling chronic poverty by addressing theextremely poor

One of the most distinctive policy features of socialtransfers in developing countries is their focus on theextremely poor and vulnerable in society. As discussedearlier, these programmes, unlike food subsidies andother past development interventions, have taken a broader approach. They combine income transfers withother public interventions that protect basic levels ofconsumption amongst the extremely poor. At the sametime, they facilitating investment in human capital andother productive assets that are expected to contributeto social and economic development and provide escaperoutes from chronic and intergenerational poverty.

To what extent do social assistance programmesfocused on extreme poverty reach households in chronicpoverty? This is an empirical question that Mckay andPerge 40 have looked into by assessing whether it might be possible to identify the chronically poor amongstthose who su er extreme deprivation. Adopting acomponents approach (see Box 1 above) and usingdata from a group of countries with three waves oflongitudinal data, they nd that a large percentage of

those who were in a state of extreme poverty at the beginning of the panel remained poor over time. Forcountries such as Nicaragua, Peru, South Africa andVietnam, the correlation was between 80 percent andover 90 percent, which implies that for those countriesextreme poverty was a good proxy indicator for chronicpoverty. It appears that structural and distributionalfactors, particularly slow growth rates of per capitaconsumption, low variance in consumption and a widepoverty gap, make it more likely for extreme povertyobserved at one single point in time to be a good predictorof persistent deprivation. In other cases, though, not allhouseholds in extreme poverty were observed to bein chronic poverty. At the same time, and across thecountries sampled in the study, a high proportion ofhouseholds in chronic poverty were observed to be inextreme poverty.

There is an important political economy dimensionassociated with social assistance focusing on theextreme poor. Shared perceptions and values aboutthe causes of extreme deprivation can play a role inpersuading political constituencies to support policyinterventions that address these groups. 41 This has been

the case amongst human development programmesin Latin America, where the focus on the poorest,alongside strong evidence of poverty impacts (seeSection 4 below), enabled a rapid expansion of thescale of these programmes. Particularly illustrativeis the case of Mexicos Progresa , which faced a majorchallenge in 2000 during a major political transition thatmarked the end of seven decades of the InstitutionalRevolutionary Partys political monopoly. A generalisedconsensus on the urgent need to tackle poverty, and the

emerging evidence pointing out the impacts of Progresa ,encouraged the incoming Fox administration to keep,and subsequently expand, the programme (by thenrenamed Oportunidades) to urban areas. 42


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10

In Brazil, President Lula signed a law in 2004 thatintroduced the notion of universal basic income for all;however, due to budgetary constraints, it was decidedthat the focus would be on the poorest rst, as they

were most urgently in need of support. The judgementabout assisting the poorest with social transfers has astrong foundation in principles of social justice. Welfareeconomics suggests that policies focusing on the poorestare welfare-enhancing. Diminishing marginal utilityimplies that a transfer will produce the greatest marginalincrease in utility if it is directed to the worst-o (see Box2). In other words, a dollar that helps us avoid poverty ismore valuable than a dollar that helps us become very rich.43

In the following section, the discussion turns to the

di erent approaches used in the identi cation andselection of bene ciaries, including implementationissues such as coverage, transfer size, regularity andlength of intervention.

The concept of diminishing marginal utility of income suggests that the bene ts to the better off from an additional unit of income will

be smaller than the bene ts of the same additional unit of income to the poor. This can be captured by the increasing concave function

of household welfare depicted in Figure 3. The ver tical axis measures the impact on marginal utility from additional units of income

represented in the vertical axis. An income transfer to the worst-off, represented by the distance between points a and b, would yielda larger welfare-enhancing outcome than an equivalent transfer to the better-off, the distance between points c and d. The implicit

greater weight of income transfers to the poorest would also satisfy the Pigou-Dalton Principle, which states that an income transferfrom the rich to the poor will result in greater equity, as long as the transfer does not reverse their position. 44 In this sense, there is a

strong justi cation for assisting the poorest, a point often highlighted by proponents of Egalitarianism. 45

Figure 3: Marginal value of an income transfer relative to household welfare

Box 2: Focusing on the poorest from a social justice perspective

3.2 Identification and selection of programmebeneficiaries

The e ectiveness of transfer programmes in reachingout to the chronically poor is largely contingent on themethods adopted for the identi cation and selection ofthe intended bene ciaries. Categorical and geographicalmethods of identi cation, together with the use ofself-selection, and of income and/or wealth indicatorsthrough means-tests or proxy means tests methods,are all extensively used in the selection of households(or individuals) eligible to receive bene ts from socialtransfers (see Table 2). 46 In practice, most programmesfollow a combination of methods, in some instancesadopting stepwise procedures starting from the poorestor most vulnerable towards upper limit thresholdsthat separate the eligible from the non-eligible. Thecombination of methods is expected to improve the


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accuracy and e ciency of delivery systems, whilststrengthening the e ectiveness of addressing extremeand chronic poverty. 47

Categorical approaches are convenient in the

identi cation stage, as they focus on groups that areregarded as vulnerable and therefore perceived to beentitled to receive support. Categorical groups can beidenti ed in terms of age (e.g. children, the elderly),health status (e.g. people with HIV/AIDS, and chronicillness, disabilities, etc.), and disadvantaged socialconditions (e.g. widows, orphans). In some contexts,categories of people may correlate closely with thechronically poor. However, empirical evidence showsthat this is an exception, rather than the rule. In most

cases, correlations between vulnerable groups andextreme or chronic poverty are considerably a enuated.In some countries in sub-Saharan Africa, for example,orphanhood is associated with lower welfare outcomes, but in many countries there is no such close correlation.

Despite the fact that more than 340 million peoplein old age (about 80 percent of elderly people livingin developing countries) have no income security anddepend on family members and other informal forms ofprotection for survival, the correlation existing between

old age and chronic or extreme poverty is country- andregion-speci c. Barrientos et al., for instance, report thatthe incidence of poverty amongst the elderly rangesfrom 7.5 percent in Taiwan to 64 percent in Ghana,with poverty-rate ratios for older groups relative tothe population as a whole also showing signi cantvariability. 48 The degree of over- and underrepresentationis, in most cases, small, suggesting that poverty in laterlife broadly re ected aggregate national poverty trends.In some contexts, social pensions have contributedto reduce chronic poverty. May, for instance, reportsthat in South Africa, only 20 percent of people in oldage su er from chronic poverty, although their risk offalling into persistent deprivation increases with age. 49

Recent estimations from Latin America also suggestthat the incidence of poverty amongst the elderly would be much higher in the absence of social pensions. InArgentina, poverty in old age would increase from 13

percent to 55 percent, in Brazil, from six percent to 52percent; in Chile, from 15 percent to 39 percent and inMexico, from 28 percent to 43 percent. 50

Disability and chronic ill health is another categoryused for the provision of social assistance in developingcountries. Disability and chronic poverty can reinforceeach other over the course of a lifetime. This is becausedisabled people incur additional costs of living,resulting from medications, assistive devices and healthtreatments. And, given their condition, they also face

many forms of discrimination, including barriers toentry into labour markets. Yet, the relationship betweendisability and poverty in developing countries is notwell established, with recent studies reporting aninsigni cant correlation between the two dimensions.51Nevertheless, depending on the degree of disability,long-term persistent poverty estimates appear to behigher than those of transitory poverty. 52

Social assistance programmes have often focused onchildren and young people. Over one billion children are

deprived of nutrition, water, sanitation, shelter, healthand education. A child from the poorest quintile of thepopulation in developing countries is, on average, twiceas likely to die before the age of ve, compared witha child from the richest quintile. 53 Existing evidence,mostly from developed countries, where long panel dataexists, suggest children who are born into poverty arelikely to go on to spend their future lives in poverty. 54 The exposure to persistent deprivation is also foundto be highly correlated with an increased likelihood ofinvolvement in delinquency. 55 Comprehensive publicinterventions can thus contribute to reducing the risksfaced by millions of children of falling into a life-timecircle of poverty.


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12

T a b l e 2

. M e t h o d s o f i d e n t i c a t i o n a n d s e l e c t i o n o f b e n e c i a r i e s o f s e l e c t e d s o c i a l t r a n s f e r p r o g r a m m e s

P r o g r a m m

e t y p e

M e t h o d s o f i d e n t i c a t i o n

M e t h o d s o f s e l e c t i o n

C a t e g o r i c a l

G e o g r a p h i c a l o r

c o m m u n

i t y

P r o x y - m

e a n s t e s t s

M

e a n s - t e

s t s

S e l f - s e l e c t i o n

P U R E I N C O M E T R A N S F E R S

T r a n s f e r s

t o p o o r h o u s e h o l d s

M e x i c o s P r o g r a m a d e A p o y o

A l i m e n t a r i o

C h i l d r e n u

n d e r a g e v e ,

p r e g n a n t a n d l a c t a t i n g

w o m e n

, p e o p l e i n

p o v e

r t y

L o c a l i t i e s o f u p

t o

2 , 5

0 0 i n h a b i t a n t s

M a r g i n a l i t y

i n d e x

b a s e d o n c e n s u s

a n d

h o u s

e h o l d s u r v e y s

N

. A .

N . A .

C h i l d a n d

h o u

s e h o l d a l l o w

a n c e s

S o u t h A f r i c a s C h i l d S u p

p o r t

G r a n t

C h i l d r e n a g e d 1 7 a n d

y o u n

g e r

N . A .

N . A .

F a m i l y g r o u p w

i t h

e a r n i n g s b e l o w

1 0

t i m e s t h e b e n e t l e v e

l

N . A .

A r g e n t i n a s A s i g n a c i n f a m i l i a r

p o r h i j o

C h i l d r e n a g e d 1 8

i n f a m i l i e s w

i t h n o

e m p l o y m e n t o r a c t i v e i n

t h e i n f o r m a l e c o n o m y

N . A .

N . A .

I n c o m e l e s s t h a n t h e

m

i n i m u m

w a g e

N . A .

S o c i a l a n d d i s a b i l i t y p e n s i o n s

B r a z i

l s B e n e c i o d e P r e s t a a o

C o n t i n u a

d a

P e o p l e a g e d 6 5 a n d

o l d e r , a n d

p e o p l e w

i t h

d i s a b i l i t i e s

N . A .

N . A .

F a m i l i e s w

i t h p e r c a p i t a

i n c o m e l e s s t h a n a

q u a

r t e r o f t h e m i n i m u m

w

a g e

N . A .

S o u t h A f r i c a s O l d A g e a n d

D i s a b i l i t y P e n s i o n s

P e o p l e w i

t h m e n t a l o r

p h y s

i c a l d i s a b i l i t i e s

I n c o m e a n d a s s e t

t e s t e d : e

a r n i n g s p e r

c a p i t a o f l e s s t h a n

R 2

, 4 2 6 p e r m o n t h a n d

a s s e t s w

i t h v a

l u e o f n o

m o r e t h a n R 4 8 4

, 8 0 0

N

. A .

I n d i a s O l d - A

g e P e n s i o n S c h e m e

P e o p l e a g e d 6 5 a n d

o l d e r

N . A .

N . A .

H

o u s e h o l d s b e l o w

t h e

1

. 2 5 - a - d

a y p o v e

r t y

l i n e

N . A .

I N C O M E T R A N S F E R S P L U S

A s s e t p r o t e c t i o n a n d a c c u

m u

l a t i o n

E t h i o p i a s P r o d u c t i v e S a f e t y

N e t

P r o g r a m

F o o d - i n

s e c u r e

h o u s

e h o l d s

C o m m u n

i t y

i d e n t i c a t i o n t h r o u g

h

c o m m u n

i t y - b

a s e d f o o d

s e c u r i t y t a s k f o r c e s

N . A .

N

. A .

N . A .


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E m p l o y m

e n t g u a r a n t e e s c h e m e s

I n d i a s N a t i o n a l R u r

a l

E m p l o y m e n t G u a

r a n t e e S c h e m e

U n e m p l o y e d u n

s k i l l e d

w o r k e r s

R u r

a l a r e a s

N . A .

N . A .

S e l f - t a r g e t i n g , n o

c h o i c e o f j o b i s o f f e r e d

T r a n s f e r s

f o r h u

m a n d e v e l o p m e n t

B r a z i

l B o l s a F a m i l i a

N / A

P o o r m u n

i c i p a l i t i e s

a r e a l l o c a t e d b a s e d

o n p o v e

r t y

e s t i m a t e s

u s i n g a n n u a l n a t i o n a l

h o u s

e h o l d i n c o m e

s u r v e y s

N . A .

I n c o m e b e l o w

a f r a c t i o n

o f t h e m i n i m u m

w a g e

N . A .

M e x i c o s P r o g r e s a - O p o r t u n

i d a d e s

F a m i l i e s w

i t h c h i l d r e n

a t t e n d i n g s c h o o l u p

t o

g r a d e 1 2 ( h i g h s c h o o l ) ,

a n d e l d e r l y p e o p l e

w i t h o u t p e n s i o n s

R u r

a l a n d u r

b a n

l o c a l i t i e s i d e n t i e d

t h r o u g

h p o v e

r t y

m a p p i n g

C e n s u s a n d s u r v e y

d a t a u s

e d t o i d e n t i f y

b e n e c i a r i e s

N . A .

N . A .

B a n g l a d e s h s P r i m a r y

E d u c

a t i o n

S t i p e n d

C h i l d r e n e n r o l l e d i n

p r i m a r y e

d u c a t i o n

b e l o n g i n g

t o f e m a l e -

h e a d e d h o u s e h o l d s

o r h o u s

e h o l d s w

i t h

u n c e r t a i n i n c o m e

s o u r

c e s

O p e r a t e s i n a l l r u r a

l

a r e a s . T h e s e l e c t i o n

p r o c e s s i s d e l e g a t e d

t o s c h o o l m a n a g i n g

c o m m i t t e e s , o v e r s i g h t

b y

e d u

c a t i o n o f c i a l s

H o u s e h o l d s w

i t h l e s s

t h a n 0

. 5 a c r e s o f l a n d

N . A .

N . A .

I N T E G R A T E D P O V E R T Y R E D U C T I O N P R O G R A M M E S

C h i n a s U r b a n D i B a o

P e o p l e w i

t h n o a b i l i t y

t o w

o r k , n o s o u r

c e o f

i n c o m e , a n d n o s u p p o r t

f r o m

f a m i l y m e m b e r s

U r b a n a r e a s u r

b a n

r e g i s t e r e d c i t i z e n s

N . A .

P o o r h o u s

e h o l d s n e e d t o r e g i s t e r w

i t h t h e c i v i

l a f f a i r s

d e p a r t m e n t a l o f c e

, w

h e r e a m e a n s t e s t i s a p p l i e d

C h i l e S o l i d a r i o

H o u s e h o l d s i n

e x t r e m e p o v e r t y a n d

v u l n e r a b i l i t y

N . A .

S e l e c t i o n b a s e d o n

s c o r e s f r o m

v a r i a b l e s

i n F i c h a d e P r o t e c c i o n

S o c i a l

N . A .

N . A .

B a n g l a d e s h s T a r g e t i n g t h e U l t r a

P o o r P r o g r a m m e

H o u s e h o l d s w

i t h n o

p r o d u c

t i v e a s s e t s ;

h o u s

e h o l d s w

h o s e

i n c o m e - e a r n e r i s

d i s a b l e d o r u n

a b l e t o

w o r k

C o m b i n a t i o n o f p o v e r t y

m a p s w

i t h p a r t i c i p a t o r y

w e a l t h r a n k i n g

e x e r c i s e s t o i d e n t i f y

v i l l a g e s w

h e r e t h e

p o o r e s t l i v e

W e a l t h r a n k i n g b a s e d

o n t a r g e t i n g i n d i c a t o r s

N . A .

N . A .

N o t e : N

. A . s t a

n d s f o r N o n A p p l i c a b l e

S o u r c e : B a r r i e n t o s , N i o - Z a r a z

a , M i g u e

l a n d M a i t r o t ( 2 0 1 0 ) . S o c i a l A s s i s t a n c e i n D e v e l o p i n g C o u n t r i e s D a t a b a s e ( V e r s i o n 5

. 0 ) . M a n c h e s t e r : C h r o n i c P o v e

r t y

R e s e a r c h C e n t r e .


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14

Within the category of children, girls and orphansare often regarded as particularly vulnerable. Undertraditional social norms, girls are more prone to su erfrom exclusion and gender discrimination, creating

signi cant gender imbalances in higher education, labourmarkets and political participation that underminewomens agency and potential contribution to socialand economic development. These gender imbalancesare found to be associated with intergenerationalpoverty transmission and chronic poverty. 56 In somecontexts, particularly in sub-Saharan Africa, orphans arehighly vulnerable and more likely to su er from long-term poverty. It is estimated that in the region, about42 million children have lost one or both parents, and

about half of them have been orphaned due to HIV/IADS.57 Some of these children su er from ill-health thatrequires additional budgetary capacity to meet healthcare related expenses.

The prevalence of HIV/AIDS in sub-Saharan Africa iskey to understanding the emergence of social transferswith the speci c objective of supporting these vulnerablechildren. South Africas Care Dependency Grantprogramme; Botswanas Orphan Care Programme;Burkina Fasos Orphans and Vulnerable Children; and

Kenyas Cash Transfer for Orphans and VulnerableChildren are all examples of transfer programmes thatprovide support to households caring for orphans andchildren a ected by HIV/AIDS. These programmeshave adopted not only categorical approaches for theidenti cation of bene ciaries, but also geographicaland/or community-based methods, along with directand indirect measures of selection. Section 3.2.1 belowdiscusses country programmes that adopt direct selectionmeasures, whereas Section 3.2.2 analyses programmesthat follow indirect measures of self-selection.

3.2.1 Direct measures for identi cation and

selection of bene ciaries

Brazils Bene cio de Prestaao Continuada , a social pensionscheme, employs categorical measures (age) jointlywith means tests and medical tests to identify and select bene ciaries. Studies have shown that the programmereasonably reaches out to elderly poor people whowould otherwise be excluded from social security. 58 In Chile, Pensiones Solidarias (now known as Subsidio

Alimentario) provides a pension to those who wereunable to generate su cient income due to disability orill health. The programme adopts a categorical approachfor the identi cation of eligible groups, whilst using

proxy means tests to select bene ciaries with per capitaincomes below US$60 a month. 59

Human development programmes in Latin Americalinking income transfers with public service provisionhave developed complex systems of identi cation andselection of bene ciaries with the speci c objective ofimproving the e cacy of policy outreach. These systemsinvolve the geographic selection of poor areas, categoricaland means-tests or proxy-means-tests procedures forthe identi cation of poor households in these areas, and

community-based validation. In Mexico, for example,Progresa was initially introduced in rural areas in selectedregions and only in communities with school and healthinfrastructure. The programme focused on rural areas,as a large percentage of households in poverty livedin rural communities. However, by doing so Progresawas de facto excluding the urban poor, who remaineddisquali ed to receive support simply for not havinglived in the geographically selected se ings. At the sametime the requirement that communities possessed the

speci ed infrastructure excluded remote rural areaswith high poverty levels. The human developmentfocus of the programmes militated against the inclusionof households without children of school age. Theseinduced exclusion errors were key in persuadingthe Mexican government to extend the programmescoverage nationwide in 2003. 60 Transfer programmesmay also have high inclusion error that is, they includethose for whom the bene t is not intended. This type oferror is often referred to as Type II error (see Table 3). ThePrimary Education Stipend Project in Bangladesh, whichreplaced the Food for Education programme in 2002,employs a combination of categorical and geographicalmeasures of identi cation, along with community-basedand proxy-means tests for selecting eligible children.Despite the multiple-selection criteria, it is reportedthat 47 percent of bene ciaries were identi ed as non-poor, which in turn re ected the ability of elite groupsto capture resources intended for the poorest children. 61 From a chronic poverty perspective, inclusion errors areof paramount importance.


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3.2.2 Indirect measures of self-selection

As pointed out above, some programmes adoptindirect measures of self-selection. These are by andlarge the main selection strategy adopted by workfareprogrammes and employment guarantee schemes. Self-selection usually takes place through the requirementthat bene ciary households provide labour at wagerates below the market-clearing level, so that onlyunskilled poor labourers, facing a low opportunity cost

of participation, will self-select for participation.In most cases, workfare programmes seem

inappropriate to address chronic poverty, as their

design features are intended to deal with transitorydeprivation. In other cases, such as Philippines Cashfor Work programme, wages were set at rates as highas the market rate, causing a crowding out e ect, giventhat the non-poor were willing to take up jobs initiallyintended for the extremely and chronically poor. 62 Manypublic works programmes have a short time windowand address seasonal and emergency unemployment.Employment guarantees and active labour marketprogrammes have a longer time window. They provide

skills training and other policy measures to improve thereinsertion of jobless workers to the labour market and/or provide job opportunities to discriminated groups

Poor households Non-poor households

Households that receive the transfer Ef cient selection Type II inclusion error

Households that do not receive the transfer Type I exclusion error Ef cient selection

Table 3. Exclusion and inclusion errors of selection

Abuja, Nigeria Miguel Nio-Zaraza


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16

(e.g. women, minorities). They are expected to be moree ective in tackling the causes of chronic poverty thanprogrammes that embrace a temporary approach toassistance. 63 The extent to which these programmes

reach out to the chronically poor, however, is unclear, but it may depend on a number of factors, including thetransfer size, length of support as well as the coverageand scale of intervention. The remaining sections discussthese issues in more detail.

3.3 Coverage, scale and transfer size

In this section, the discussion focuses on coverage, scaleand size, whereas Section 3.4 returns to the issues ofregularity and duration of support. While design featureshave dominated the discussion of social assistance,issues of coverage, scale and transfer size are of muchgreater signi cance to address chronic poverty. Therapid introduction of transfer programmes in the lastdecade has resulted in a steep rise in the global coverageof social assistance in the developing world.

The largest social transfer worldwide, Indias NationalRural Employment Guarantee Scheme (NREGS),currently provides employment opportunities to 48million workers, which indirectly bene ts nearly 240million people in the country. In China, the MinimumLiving Subsidy Scheme (Urban DiBao) currentlysupports 22 million households in extreme deprivation,and the Chinese government aims to cover 1.3 billionpeople by 2020. All in all, di erent types of transfersnow reach in excess of 190 million poor households, withapproximately 860 million people currently bene tingdirectly or indirectly from social assistance (see Table 4).This gure could potentially increase up to one billionpeople if countries currently piloting programmesare able to roll them out to national scale. This meansthat social transfer programmes have become the mostimportant policy instrument against extreme andpersistent deprivation at the present time. Remarkably,these programmes have made a signi cant contributionto tackling the causes of chronic and intergenerationalpoverty.

Section 4 below discusses the evidence with regardto these poverty impacts in more detail. Several factors

seem to contribute to the poverty e ectiveness oftransfer programmes, but coverage, scale and transfersize, as well as regularity of transfers and duration of

support, are important determinants of the capacity ofsocial transfers to address chronic poverty.

For most part, the share of the population in povertycovered by transfer programmes varies from country

to country. This ranges from just a fraction of those inpoverty in most sub-Saharan African countries, to nearly25 percent of the total population in Brazil and Mexico,and 50 percent of households in South Africa. Scale aswell as transfer size are functions of both the magnitude ofpoverty incidence and the budgetary and administrativecapacity of governments. As illustrated in the fthcolumn of Table 4, budgetary capacity has contributedto making the global coverage of social assistance largelyskewed towards middle-income countries, as these have

more scal space to introduce transfer programmesto scale. Most country programmes allocate less thanone percent of gross domestic product (GDP) to socialtransfers, although the share is conditional on the sizeof economy, the e ciency of tax collection systems and,naturally, the scope and scale of the intervention.

Transfer size is intimately connected withprogrammes objectives and the principles underpinningprogramme design choices. In Ethiopia, the ProductiveSafety Net Programme (PSNP) focuses on the food gap

during the hungry season to establish an optimal transfersize. 64 In Latin America, the level of transfers amongsthuman development programmes varies considerably,depending on household composition. But measured aspercentage of household income, transfers range from sixpercent in Brazil to more than 20 percent in Mexico. 65

The real value of transfers is especially important,as in ationary trends can erode the purchasing powerof transfers and hence undermine potential povertyimpacts amongst the chronically poor. The experienceof Brazils Bolsa Familia is illustrative in this respect.The programme experienced a fall in the averagevalue of transfers associated with increases in theconsumer price index. And it was not until 2007 thatthe government took steps to restore the initial value oftransfers. 66 That political decision largely bene ted theseverely and chronically poor, as nearly 40 percent ofthe poorest Brazilians receive 80 percent of grants fromBolsa Familia.

The level of transfers can be an important determinantof the poverty e ectiveness of social transfers. Withinlimits, larger transfers are likely to have a greatere ect on chronic poverty. Filmer and Schady nd clear


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evidence of diminishing marginal returns to transfersize, in terms of school enrolment from CambodiasCESSP Scholarship Program. 67 Bourguignon et al. also

nd, in their simulation study of Brazils Bolsa Escola ,

that doubling and quadrupling the transfer size leadsto a decreasing probability of school a endance. 68 Theseresults suggest that ceteris paribus the marginal social

return to transfer size in terms of increased schooling,improved nutritional and health status, or reductionin poverty, becomes lower at high levels of transfers;although it is hard to generalise from a few studies. This

is clearly an area where future research would be highlyinformative.

Table 4. Global coverage of social assistance in developing countries

Programme title Country Type No. ofhouseholds(in millions)

No. ofbene ciaries(in millions)

Countryclassi cation1/

Povertyfocus2/

National Rural EmploymentGuarantee Scheme

India Income transfer plus

48.0 240.0 Lower middleincome

High

Urban DiBao China Integrated

antipoverty

22.0 110.0 Lower middle

income

High

Program Bantuan Tunai,Bantuan Tunai Langsung

Indonesia Pure income 19.1 95.5 Lower middleincome

High

Bolsa Familia Brazil Income transfer plus

12.5 52.3 Upper middleincome

High

Rural Dibao China Pure income 10.5 42.0 Lower middleincome

High

Prvidencia Social Rural Brazil Pure income 7.5 37.5 Upper middleincome

Categorical

Indira Gandhi National OldAge Pension Scheme

India Pure income 15.7 31.4 Lower middleincome

High

Progresa-Oportunidades Mexico Income transfer plus 5.5 27.5 Upper middleincome High

100 Days EmploymentGeneration Scheme (EGP)

Bangladesh Income transfer plus

3.0 15.0 Low income High

Tekun (transfer in lessdeveloped regions fordestitute households)

China Pure income 6.6 10.7 Lower middleincome

High

Bene cio de PrestaaoContinuada

Brazil Pure income 2.4 10.0 Upper middleincome

High

Expanded Senior CitizensAct of 2010

Philippines Pure Income 2.0 10.0 Lower middleincome

Categorical

National Family Bene tScheme

India Pure income 2.0 10.0 Lower middleincome

High

Old Age Pension South Africa Pure income 2.4 10.0 Upper middleincome

High

Child Support Grant South Africa Pure income 1.9 9.5 Upper middleincome

High

Subtotal for 15 largestprogrammes

161.0 711.4

Other 79 programmes 30.4 151.9

TOTAL Developing world 3/ 191.4 863.3

1/ This column classi es countries by income groups according to 2009 gross national income (GNI) per capita, calculated using the World Bank Atlasmethod. The groups are: 1) low income, $995 or less; lower middle income, $9963,945; upper middle income, $3,94612,195; and high income,$12,196 or more.2/ Poverty focus has three categories: high if targeted on extreme poverty or poverty; (ii) moderate if it covers some of the non-poor; (iii) categoricalcovering poor and non-poor.3/ This total does not include workfare programmes, fee waivers and school stipends. If these programmes were included, the total number of bene ciaries from social assistance would be nearly one billion people in the developing world alone.Source: Barrientos, Nio-Zaraza and Maitrot (2010). Social Assistance in Developing Countries Database (Version 5.0). Manchester: Chronic PovertyResearch Centre; and World Banks country classi cations, available at: http://data.worldbank.org/about/country-classi cations


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3.4 Regularity and duration of support

There is considerable evidence suggesting that inthe absence of well functioning insurance markets,insecurity leads to ine cient use of household resourcesthat can result in persistent deprivation. Poor ruralhouseholds may opt for low-risk, low-return cropproduction, or reducing food intake in response tocrises. Regular, predictable and reliable income transferscan provide a minimum level of security that is essentialfor consumption smoothing and medium- and longer-term investment decisions, which, as discussed abovein Section 2, are pivotal in breaking poverty traps andintergenerational cycles of poverty. The regularity oftransfers thus becomes a critical element for protection,whilst triggering changes in household resourceallocation that are imperative for addressing the causesof chronic poverty.

Empirical evidence also suggests that regulartransfers can relax credit constraints. In Brazil, theregularity of a social pension, Prvidencia Social Rural,which was introduced to cover informal workers, hasenabled pensioners to access bank loans, as membershipof the programme seems to have reduced screening andother informational costs to lenders. 69 The increaseddemand for credit appears to support Delgado andCardosos ndings, pointing out that part of the pensionprovided by Prvidencia Rural is invested in seeds,tools and other productive assets that strengthen small-scale economic activities and employment amongst bene ciary households. 70 Similar results are reportedfrom Bolivia 71 and Namibia, 72 where a large percentageof social pensions bene ciaries have invested part oftheir transfer in small-scale enterprises, livestock andproductive assets to support their households.

In terms of transfer duration, there is no rule of thumbto guide policy, as the optimal length of assistance to

maximise impact on extreme and chronic poverty may be contingent on the targeted population and on thesocio-economic context. Households facing chronicpoverty are more likely to require a longer time window

of support to tackle accumulated de cits in productivecapacity and basic capability. Some programmes,old age and disability pensions or schooling relatedtransfers for example, provide demographic timewindows for support. Other programmes have speci edtime windows for intervention. In Bangladesh, BRACsTargeting the Ultra Poor Programme provides incomeand asset transfers over a period of 18-24 months tohouseholds in extreme and chronic poverty, prior totheir insertion to more standard microcredit schemes.

The extent to which the chronically poor are able tond a sustained poverty exit after two years of support

is unclear. Research is currently being undertaken toaddress this particular issue.

Human development programmes in Latin Americaprovide support to the poorest families for a period longenough to build human capital amongst bene ciarychildren. The timing of policy is also important here.As discussed below in Section 4, nutritional andhealth interventions in early life, sustained throughout

childhood, are signi cant determinants for improvingthe productive capacity of people in adulthood. Thisconnects to the question of tackling the intergenerationaltransmission mechanisms of chronic poverty. Inthat perspective, the e ectiveness of social transfersin addressing chronic poverty can be linked to thecombinations of methods for identi cation and selectionof bene ciaries discussed earlier. Programmes that, bydesign, aim to address chronic poverty are naturallymore likely to be e ective in reducing its incidence. Thefollowing section will consider the range of impacts ofsocial assistance programmes on chronic poverty.


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The discussion in the previous sections identi edseveral channels through which social assistanceprogrammes could have an impact on chronic poverty.First, some types of transfer programmes explicitlyaim to improve the long-term productive capacity ofhouseholds by facilitating human capital investment. Theimpact of transfers on raising household consumptionactually reinforces these long-term aims. For example,improvements in nutrition will strengthen outcomes inschooling and health status. However, for simplicity,the discussion on programme impacts is divided intothree separate dimensions: nutrition (Section 4.1.1);health status (Section 4.1.2); and education (Section4.1.3). Second, another group of programmes seeks toprotect households assets against idiosyncratic andcovariate shocks and/or to support households e ortsto accumulate nancial and physical assets. Section 4.2reviews the existing literature with regard to the impactof social transfers on facilitating asset protection andasset accumulation.

The sections below cannot review the availableevidence in full but, instead, aim to outline the general

ndings associated with persistent deprivation. By

and large, the focus is on quantitative studies, as theirmethodology facilitates a comparative discussionacross countries and programmes. A large numberof studies presented in this section come from large-scale programmes in middle-income countries, whereprogramme agencies have paid close a ention torigorous evaluation. This results in a bias towardsmiddle-income countries and towards well establishedprogrammes. The section concludes with a summary ofkey ndings and their implications for policy.

4.1 Enhancing human capital

The design features of many social transfer programmeshave been shaped by the knowledge that strengthening

the long-term productive capacity of households helps toreduce and prevent extreme and persistent deprivation.A growing body of research con rms that social transfersare e ective instruments for enhancing human capital,as they improve nutritional status, health and schoolingamongst the poorest. In the following sections, the focusis on the main ndings regarding the impacts of socialtransfers on nutrition, health status and schooling.

4.1.1 Impacts on nutrition

Nutrition plays a central role in enhancing humandevelopment. A well balanced diet is the foundationfor health and a central input for labour productivity.Be er nutrition means stronger immune systems andless frequent illness. The timing of support is relevanthere. Good nutrition is especially important for youngchildren, as critical cognitive developments take placeat an early age.73 Well fed and healthy children learn be er and grow physically (and mentally) stronger. Thisprovides a justi cation for the key objective of social

transfers, which is to protect food consumption, thelargest expenditure item for poor people. Economistsargue that elasticity of demand for calories increases asincome falls, implying that many forms of nutritionalde ciency are highly correlated with extreme andchronic poverty.

Child (mal)nutrition is normally measured usinganthropometric data. Weight for age provides insightsinto the short-term impact of improved nutrition,whereas height for age provides information on the

4 Do social transfers reduce

chronic poverty?


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long-term e ects of improved nutrition. Height for ageis particularly informative as regards the longer-termimpact of transfers, including labour productivity andpersistent deprivation. Studies have consistently foundthat height de cits are established early in life and oftenpersist into adulthood, 74 causing negative impacts oncognitive development 75 and future earning capacity. 76

A study of the Child Support Grant in South Africands that bene ciary children are predicted to be 3.5 cm

taller as adults.77

The present value of increased futureearnings is estimated to be 60-130 percent greater thanthe cost of the grant. Evaluation studies of MexicosProgresa-Oportunidades nd that children exposed tothe programme gained one centimetre in height for agecompared a control group, two years after the start ofthe programmes. The gain was 0.65cm six years after thestart of the programme. 78 Households receiving supportfrom Bono de Desarrollo Humano in Ecuador increasedtheir food expenditure by 25 percent, which was linked

to improvements in nutritional status. 79 In Colombia, asubstantial increase in intake of protein-rich foods andvegeta

Documents

Barrientos and Nino-Zarazua (2011) Social Transfers and Chronic Poverty. Objectives, Design, Reach and Impact