social protection design issues targeting and conditionality franziska gassmann bangkok, june 2012
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Social Protection Design Issues
Targeting and Conditionality
Franziska Gassmann
Bangkok, June 2012
Outline
• Targeting• Rationale• Methods• Costs versus benefits• Evidence
• Conditionality• Definition• Rationale• Evidence
Targeting…
• …is concerned with the allocation and distribution of resources and services (Spicker, 2005)
• …will be an issue wherever a subsidy/transfer is provided to one group and financed by others (WB, 2000)
• …is a means of increasing program efficiency by increasing the benefit that the poor can get within a fixed program budget (Coady et.al. 2004)
Why targeting?
• The demand for safety nets or transfers may be indefinite, though resources are usually limited• Implies a need for targeting
• Although universal access may be the goal (e.g. health services, education), some targeting may be needed to• Channel limited public resources where financing is a
public/private mixE.g. subsidies for health insurance, fee waivers for
education• Equalize quality of services or ensure better quality
services for the poor, demand-constrained households
• Gain political support
Social transfers for everybody or only a few?
• Objective of social protection• To raise and/or protect the living standard of the
poor with public spending
• Objective of policy maker• design a policy that is effective and efficient
Effective: achieves the objective, reaches the target group
Efficient: there is no alternative policy that would have the same result at lower cost
How to identify ‘the few’?
Example: Burkina Faso
a. High poverty rate with apparently rather equal distribution among the poor
b. The poorest 10% have a consumption level of less than half of the other poor. This group is most in need of a transfer.
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Source : Grosh et al., 2008
Targeting Methods
• Categorical/group• Geographic• Demographic (children, elderly, other)
• Individual assessments• Means test (verified, not verified)• Proxy means test• Community-based
• Self-selection• By purchase of commodity• Work requirement
• Broad targeting• Types of public spending
Means tests
• Income and/or asset-based• Eligibility is assessed individually or per household or family• Verified means-test:
• Information is verified against independent sources
• Simple means-test• No independent verification
• Examples: industrialized countries, most Eastern Europe, Kyrgyz Republic, Mozambique, India, Sri Lanka
Individual assessment
Proxy means tests
• Eligibility is assessed per household or family• Test is based on multiple indicators at household level • More easily observable than income
• Score determines whether household is eligible• Needs:
• Detailed and regular analysis of household level data (e.g. HBS)
• Poverty needs to be clearly correlated with specific household characteristics
• High capacity needs• Reduces error of inclusion• Examples: Armenia, Chile, Mexico, Colombia, Indonesia
Individual assessment
Community-based targeting
• Eligibility assessed individually or per household or family• Presumption that local authorities are better able to identify the
poor because they have more accurate information• Use of existing structures or newly established ones• With or without central directives• Little evidence on effectiveness• Possible drawbacks:
• Overburden local authorities• Capturing by local elites, reinforcing existing differences• Conflict over resources
• Example: Albania, Uzbekistan, Tajikistan, Zambia
Individual assessment
Categorical/group targeting
• Eligibility is assessed per individual, household or family characteristics that are• Easy to observe• Hard to manipulate• Correlated with poverty
• Age, gender, disability, work status, …• Lower administrative needs
• Examples: family benefits, social pensions; many pilot programs start in geographically selected target districts
Categorical/group
Categorical targeting using demographic indicators
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Example: targeting children < 5 years
Categorical targeting based on geographical indicators
Poverty map of extreme poverty in Panama (source : poverty map 2003, MEF)
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Self-targeting
• Universal coverage, but design discourages the non-poor to apply• Hard physical labor• Very low wage• Quality of good (e.g. broken rice)
• Often achieved by imposing a cost to participation• Work requirement• Having long queues• Attaching a stigma
• Example: Argentina, Bolivia, India
Self-selection
Summarizing…
• Frequently a combination of targeting methods – hybrid forms
• The alternative to narrow targeting • Universal access to a benefit• Broad targeting
Broad targeting
• Principle: some categories of public spending matter more to the poor than to other categories• Social services• Primary education• Health care centers
• The case for broad targeting:• Better health, education, access to clean water or
basic physical infrastructure raise well-being of the poor higher productivity, higher income
• Can be expensive, lot of leakage
Subsidies per Capita, IndonesiaSource: van de Walle, 1998
Broad targeting
Costs versus benefits
• Is targeting an effective and efficient policy instrument to reduce poverty?
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Case 2 – Perfect targeting
From a purely theoretical perspective…
• …targeting the poorest is the most effective and efficient option in reducing the poverty gap
• …targeting achieves the biggest reduction of the poverty gap taking into account budget constraints
Is this plausible?
• Targeting comes at a cost• Human rights• Stigmatization of the poor• Political economy
Benefits of targeting versus its costs
Targeting comes at a cost
Administrative Private Social Political Disincentive Leakage
Means test High High High High Low
Proxy MT High Low Low Low Low Low
Community Low Low High Low Low
Categorical Low Low Low Low Low High
Self-targeting Low Low Low Low Low High
Appropriate when…
Means test High share of verifiable income, large benefits, high admin capacity
Proxy MT High admin capacity, good data, large benefits or multiple programs
Community Low admin capacity, strong community structure, low benefit
Categorical Low admin capacity, strong correlation with poverty
Self-targeting Crisis situation, chronic poverty, low admin capacity
For example: Administrative costs
Source: Grosh, et al. 2008
Source: Grosh, et al. 2008
Easy vs. hard-to-verify income0
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Figure 1a: Share of Easy-to and Hard-to-verify incomes: Kyrgyzstan
Easy-to-Verify Hard-to-verify
Targeting: Trade-off between costs and efficiency
• Type I errors: eligible families are excluded Exclusion error (reduced horizontal efficiency)
• Type II errors: non-eligible families are included Inclusion error (reduced vertical efficiency)
• The aim to reduce Type II errors tends to increase Type I errors
• Higher targeting costs are acceptable if they lead to sufficiently better targeting (Coady et.al. 2004)
Errors of Inclusion
Source: Grosh et.al. 2008
Potential reasons for targeting errors
• Targeting methods not appropriate given the country context and nature of poverty
• Insufficient financing limits inclusion of all the poor
• Poor do not take up benefit• Lack of information• High transaction costs• High opportunity costs• Stigma
Evidence of targeting effectiveness
Targeting Methods – Comparison
• Study by Coady, Grosh & Hoddinott (2004)• 122 programs from 48 countries• 49 cash transfers, 18 near cash, 12 food transfers• 18 food-subsidy and 5 non-food subsidy programs• 20 public work programs
Targeting Performance by Targeting
Method Source: Coady et.al., 2004
Main findings
• Targeting can work…• Mean = 1.25, top-10 between 2 and 4
• …but not always• One quarter of programs is regressive
• No clearly preferred method• Within method variation of 80%
• Weak ranking• Means, geographic, work requirement• Proxy means, community based, to children• To elderly, community bidding, commodities
• Context, program design and implementation matter
Conclusion
• Targeting is never perfect!• Trade-off between costs and benefits
• How much imperfection is tolerable?
• Targeting effectiveness depends on country context and implementation
• Are programs for the poor poor programs?• Political economy should not be underestimated
‘People underestimate how difficult it is to target the poor’ (van de Walle, 1998)
Conditionality
Conditionality – a first glance
• Definition of conditionality: • conditionality asks for some form of behavioral
compliance in exchange for the money in order to continue receiving support
beneficiaries have to meet certain conditions that are spelled out by the program
• Frequent conditions• Education : enrolment, attendance of 85%• Health: regular check-ups for children 0-5,
vaccinations, assisted birth, preventive health care measures
One term with multiple meanings
There are many CCT programs worldwide
But they differ substantially…• Exemptions
• Majority of programs, no official exemptions, at times indirect exemptions
• In Kenya & Tanzania those without access are exempt
• In Jamaica, children with disabilities are exempt
• Coverage• Non-compliance affects the
entire transfer in 40% of CCTs vs. 13% of CCTs where only a supplementary grant is affected
• Objective• 22% of all 41 CCTs reviewed
have an exclusive health or education focus
• Expected performance• In 67% of all CCTs
conditionality is output-related
• Passing grade in Cambodia; single repetition in Turkey
• Monitoring• No monitoring in Ecuador• Light monitoring in Pakistan,
Bangladesh & Cambodia• More intensive monitoring in
Brazil, Chili, Mexico & Kenya
• Enforcement• Punitive in Mexico & Jamaica• Developmental in Brazil &
Chili
Why opt for conditionality?
Argument 1 : Private efficiency
• Households under-invest in the education and health of their children from a private point of view• Parents are not always well informed about the (future)
value of education• Parents (or at least one of them) do not always behave
altruistically towards their children• Parents have self-control problem and are willing to
sacrifice future for present consumption• Parents of low-income households tend to be more risk-
averse and shy away from investments in education Conditionality could guide beneficiaries, encourage them to
invest and function as a self-control device
Argument 2: Social efficiency
• Households under-invest in the education and health of their children from a social point of view• They do not factor in positive side effects from
educating children or from preventive health care measures
• They do not consider future social costs of under-investment such as increased crime, lost labor contribution and less informed political participation
Conditionality can encourage households to increase their investments
Argument 3 : Political economy
• Social cash transfers often have difficulties in securing long-term political support due to worries about• Beneficiaries not knowing how to spend the money and
misusing this flexibility • Beneficiaries becoming dependent and not being
interested in improving their situation• Not having any control over the impact of a rather cost-
intensive intervention Conditionality can make a social cash transfer program more
attractive by controlling the use of funds, giving beneficiaries an extra nudge and guaranteeing a certain impact.
Redistribution may be better acceptable if beneficiaries ‘behave’ accordingly (condition).
Argument 4 : Empowerment
• Beneficiary households of social transfers and/or individual members are often in an inferior position• Government support is often presented as charity as
opposed to an entitlement• The use of the transfer is often decided by the
household head without any further consultationConditionality can give beneficiaries / individual
household members a negotiation device and allow them to exercise their rights
Argument 5 : Equity
• Targeting is bound to be imperfect and costly.• Households who do not qualify for the transfers
apply and benefit nevertheless (inclusion error)• Trying to reduce inclusion errors can have a
negative impact on exclusion errors and end up being costly
Conditionality can make a program unattractive to those who don’t quality and therefore serve as a screening device
Evidence ?
Evidence on behavioral changes
• Few (long-term) studies on the impact of conditionality at household level
• In the past, the good performance of a conditional cash transfer program was erroneously cited as evidence of the value added of conditionality
• The impact varies greatly from a magnifier effect of conditionality of 16 times (Mexico) to no impact at all in Malawi
Evidence on the political economy
• Very little evidence on the political effects
• A study by Taylor-Gooby (2001) confirms the rising popularity of activation / conditionality in the Western World
• Conditionality was seen as an important tool by politicians in Brazil to guarantee impact, avoid dependency; better monitoring reduced however mayor’s chances of reelection
• Mixed results for Zambia: popularity of conditionality as such but unpopularity of consequences of conditionality
Evidence on empowerment
• Very little but anecdotal evidence
• Adato et al (2002) show that the trainings women had to attend increased their confidence & awareness
• Molyneux (2006) & Bradshaw (2008) hint at disempowering effects with conditionality confining women to their female duties & suggestion that they were bad mothers before
• Zambia
• Individuals with a partner unanimously confirmed that conditionality had helped them to negotiate household expenditure with the partner
Evidence on equity
• Limited evidence• Alvarez et al (2008) find that
conditionality improved the targeting effectiveness in Mexico
• In Zambia, a monthly transfer of 10 US$ wouldn’t have discouraged the better off from participating
• In rural areas in Zambia, the better off even had a greater likelihood of participating than the poorer segments
Self-assessed Yes No
Very poor 10% 90%
Poor 13% 87%
Middle 11% 89%
Upper middle 0% 100%
Rich 0% 100%
Conditionality may lead to inefficiency
• Impact inefficiency• Conditionality in one area can negatively effect
behavior in another area• Households can perceive conditionality as lack of trust
and get demotivated• Design inefficiency
• Conditionality does not address actual/real problem• Implementation inefficiency
• Direct/indirect administrative costs• Capacity constraints• Promotion of corruption
How to decide?Source: Fiszbein & Shady, 2009
1. The rationale behind conditionality is to optimize household behavior, empower beneficiaries, increase the political attractiveness of social cash transfer programs and improve the targeting effectiveness
2. The evidence base on which conditionality rests, in particular for the empowerment, political economy and equity effects is rather thin
3. Conditionally also has the potential to introduce a number of impact, design and implementation inefficiencies that lower the cost-effectiveness of a social cash transfer program.
4. Prior to deciding for or against conditionality, it is important to analyze the potential of conditionality to effect any positive changes, the costs and inefficiencies associated with it as well as the capacity of a country to successfully manage the process
Key messages: Conditionality
Recommended readingTargeting:• Grosh, M. et.al. (2008), For Protection and Promotion. The Design and
Implementation of Social Safety Nets, The World Bank, Washington DC.: chapter 4 (Targeting) http://siteresources.worldbank.org/SAFETYNETSANDTRANSFERS/Resources/281945-1223052223982/For_Protection_and_Promotion-Ch4.pdf
• SAMSON, M., VAN NIEKERK, I. & MAC QUENE, K. 2006. Designing and Implementing Social Transfer Programmes, Cape Town, Economic Policy Research Institute.
Conditionality• Fiszbein, A. and N. Shady (2009), Conditional Cash Transfers. Reducing present and
future poverty, The World Bank, Washington DC.• de Janvry, A. and E. Sadoulet (2005). Conditional cash transfer programs for child
human capital development: Lessons derived from experience in Mexico and Brazil. GRADE 25th anniversary Conference, "Investigación, Politicas y Desarrollo". Lima, Peru. Available from: http://www.cgdev.org/doc/event%20docs/MADS/SAIS-CCT.pdf
• Standing, G. (2007). Conditional Cash Transfers: Why Targeting and Conditionalities Could Fail. One Pager No. 47. Brasilia, Brazil, International Poverty Centre. United Nations Development Programme. Available from: http://www.undp-povertycentre.org/pub/IPCOnePager47.pdf
• Schuering, E. (2010), Conditions, conditionality, conditionalities, responsibilities – finding common ground, MGSoG Working Paper, 2010WP014, Maastricht Graduate School of Governance, Maastricht. http://www.merit.unu.edu/publications/mgsog_wppdf/2010/wp2010-014.pdf
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