:Safety Nets and Effective Targeting

Ruslan Yemtsov Lead Economist, World Bank

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Outline

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1. Economic growth, poverty and inequality: new context2. Shared prosperity3. How shared prosperity can be achieved? Role of investment in

the human capital and social protection.4. Evidence on contribution of social protection to shared growth• Channels of impact• Strength of evidence and practice• Is evidence making an impact?

5. Patterns of social protection around the world: gap analysis6. Political economy of social protection• What is political economy?• Social protection through the prism of political economy • Pathways to social protection: real and false dilemmas

7. Role of donors and partners

Poverty: is growth enough?Sub-Saharan Africa can and should take a leading role

* Preliminary

1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2010*0

10

20

30

40

50

60

70

51

5958

4948

43

35

29

19 18Sub-Saharan Africa

World

Pop

ulat

ion

livin

g on

less

than

$1.

25 a

day

, 200

5 P

PP

(%

)

Inequality: why are we concerned?• Calculations for Asia show that if inequality had not risen, then

economic growth could have lifted almost a quarter of a billion more people out of poverty over the last two decades.

• Similarly, for Brazil between 1998 and 2009, had inequality not declined to the extent it did, annual growth would have had to have been 4 percentage points higher to achieve the same poverty reduction over this period.

• Asian Development Bank (2012), ibid.• Lustig, Ortiz-Juarez and Lopez-Calva (2011), ibid

4

1992-93 1998-99 2005-060

10

20

30

40

50

60

70

80

19.4

24.75 28.8

6563.8

71

India - Immunization

Bottom 40%

Top 20%

Perc

enta

ge o

f chi

ldre

n 12

-23

mon

ths

fully

imm

uniz

ed

2000-01 2006 20110

5

10

15

20

25

22.2

18.1

16.2

8.98.4

8.4

Uganda - Underweight

Bottom 40%

Top 20%

Perc

enta

ge o

f chi

ldre

n un

der

five

year

s cl

assi

fied

as

unde

rwei

ght

Social contract needed to increase opportunities for all

Russian Federation (C) 1999-2009

China (C) 1999-2008

Mexico (C) 1998-2008

Brazil (I) 1999-2009

South Africa (C) 2000-2009

Indonesia (C) 1999-2010

Rwanda (C) 2000-2011

Bangladesh (C) 2000-2010

Egypt, Arab Rep. (C) 2000-2008

Côte d'Ivoire (C) 1998-2008

-2

0

2

4

6

8

10

Annu

al C

onsu

mpti

on G

row

th (%

)

Income growth of the bottom 40%(Annual household consumption rate, early 2000s - late 2000s)

Average income growthIncome growth of the bottom 40%

First — Analyze performance by income growth of the poor

Second — Analyze performance of the poor compared to the average

1965 1970 1975 1980 1985 1990 1995 2000 2005 20100

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

19,585

25,510

31,899

39,545

42,486

4,989

6,364 6,4917,430

6,358

United StatesPP

P co

nsta

nt 2

005

inte

rnati

onal

$

Income Growth of the Bottom 40%1967-2011: 0.55% p.a.2000-2011: -1.41% p.a.

GDP per capita

Mean income of bottom 40%

-2 0 2 4 6 8 10 12

-2

0

2

4

6

8

10

12

Consumption Growth of the Total Population (%)

Cons

umpti

on G

row

th o

f the

Bott

om 4

0% (%

)

Consumption growth of the bottom 40% is positive and faster than the average

Consumption growth of the bottom 40% is positive but slower than the average

Growth in incomes of the poor requires overall growth. But the same level of growth might result in different outcomes.

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Evidence shows social protection and labor policies contribute to sustainable, inclusive growth

National level- Enables reform- Stimulates aggregate demand

Community level- Creates productive assets- Improves functioning of labor markets- Creates local spillovers from increased demand

Household level- Fosters accumulation of assets- Increases entrepreneurial activity- Increases/preserves human capital

Source: Alderman and Yemtsov (2012)

Scale of effectsCountry/ Level Program/Type Method Results Study

Cross-country/ macro All SP spending Regression Moving from 0 to 2% of GDP spending on SP increases growth by 0.1-0.4 pp

Zaman and Tiwari (forthcoming)

South Africa/ macro Gundo Lashu and EPWP/Workfare SAM Labor intensive PW on the scale of 0.2% of GDP increases GDP by 0.34%

Mc Cord and Van Sventer (2004)

US/macro 2009 Stimulus package Modeling Multiplier for expansion of the food stamp program is 1.7, larger than for infrastructure spending (1.6)

Zandi (2009)

Representative econ./ macro

Fully Funded (FF) Pensions Simulations Moving from PAYG to FF pensions increases GDP by 3-5% in 110 years

Corsetti and Schmidt-Hebbel (1995)

Bangladesh/ macro BRAC/Rural develop-Microcredit SAM BRAC was boosting GDP by 1.15% in 1998 while its cost was 0.2% of GDP

Alamgir (1996); Mallick (2000)

Brazil/ meso Bolsa familia/ CCT Regressions 10% increase in the program increases municipal GDP by 0.6%, B/C=3.5

Landim (2009)

India/ meso NREGA/ Public Works Simulations/ SAM Public works in village has increased HH incomes with a multiplier of 1.77

Hirway ey al (2009)

Malawi/meso Dowa Emergency Cash Transfer (DECT) /CT

Simplified SAM Total multiplier effects of the DECT between 2.02 and 2.79 Davies and Davey, 2007

China/micro Southwest China Poverty Reduction/CT ERR ERR = 8.6-9.8% (lower bound) Ravallion and Chen (2005)

Bangladesh/ micro Food for Education (FFE)/ SF ERR ERR = 15-24% Ryan and Meng (2004)

Colombia/ micr Familias en Accion/CCT B/C Benefit-cost ratio = 1.59 IFS, Econometrica, SEI (2006)Mexico/ micro PROCAPMO/CT Benefit-cost ratio Benefit-cost ratio = 2.5 Sadoulet, De Janvry and Davis (2001)

Mexico/ micro Oportunidades/CCT ERR ERR = 8%/year (lower bound); 17% (higher bound) Coady and Parker (2004); Gertler et al (2006)

South Africa/ micro Child Support Grant/ CT B/C Benefit-cost ratio = 3.3-4.5 Agüero and others (2007)

Chile/ micro Progressive Housing Program/Subsidy ERR ERR = 18%, much higher than country's official cut off rate of 12%

Marcano and Ruprah (2008)

Pre revolution view: be rich to be protected

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* Counts CTs with clear start dates only; green countries have had or currently have a CT

2000 20129 countries,

25 programs*41 countries,

245 programs

The revolution is happening where needs are greatest Rapidly

201035 countries

123 programs

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1 billion people covered 1.2 billion

extreme poor

345m extreme poor covered

855m extreme poor not yet

covered

Are we there yet? 11.2

1 billion people covered

1.2 billion extreme

poor

345m

Entire developing

world

352m

167m

74m

Upper middle income

countries

178m

398m

Low income countries

99m

Lower middle income

countries

652m

488m

173m

Budget problem

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LIC

LMIC

UMIC

HIC

All Countries

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

11%

25%

69%

100%

40%

33%

10%

25%

0%

19%

0%

25%

0%

0%

11%

0%

15%

0%

0%

6%

Baseline Mean BCR (0.082) BCR top 25% (.217) BCR max (.400)

PERCENT COUNTRIES ACHIEVING POVERTY REDUCTION TARGET WITH BCR SCENARIOS, BY INCOME GROUPING

0

2

4

6Social Safety Net (SSN) Spending (% of GDP)

AFRICA EAST ASIA AND THE PACIFIC

EASTERN EUROPE AND CENTRAL ASIA

MIDDLE EAST AND

NORTH AFRICA

SO.A-SIA

LATIN AMERICA AND THE CARIB-

BEAN

Why political economy?

• Development and poverty reduction are intrinsically political• Reaching the poorest is a particular challenge• Do they deserve it? Will richer & more powerful

groups support investments for the poorest?• Research shows that politics has been central to

the success and failure of social protection• Politics viewed here as an enabling as well as

constraining force18

What is political economy analysis?No single definition, but a good ‘in a nutshell’ by the OECD/DAC:

Political economy analysis is concerned with the interaction of political and economic processes in a society: the distribution of power and wealth between different groups and individuals, and the processes that create, sustain and transform these relationships over time.

Cross-cutting and complementary to technical analysis, and analysis aimed at identifying priorities

The fundamental purpose of PE analysis is to promote development effectiveness

Different approaches have been and are being used – no one size fits all, but there are emerging lessons of useful approaches, and about various ‘how to’ issues

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• Story of SP is political economy success in MICs• large scale programmes• government buy-in • cross party support (reduce electorally vulnerable)• ongoing financing commitments• popular support giving mandate• rights based discourse• state responsibility to protect poorest

• Less evidence of political economy success in LICs• Reluctance to invest in SP (‘consumption’) and incur future liabilities

on part of governments• Success stories – eg Rwanda, Ethiopia and Nepal

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Political Stimulus

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• Political factors• Electoral considerations• Security concerns• Instability• Address previous injustice• State building needs • Donor pressure/support• Popular national demand

• How resolve demands of competing priorities, persuade others and build constituency for SP?

• How to ensure both political and popular support for major new initiative?

• Pre-requisites for building sustained social protection system;• Political buy in (senior policy champions & cross party

endorsement)• Secure medium term financing (donor/domestic)• Legislative underpinningRequires recognition;

Prior mechanisms for supporting the poor not viable Market failure and ongoing exclusion from growth of significant

number of citizens• Cost of failure to provide support (eg alienation, instability,

conflict, extremism) • Provision of social protection is in interest of the state

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The links between politics and social protection: a basic conceptual framework

From NGOs & policy spaces to politics• Few nationally-driven SP policies/programmes

have so far emerged from open policy spaces (e.g. Sector Working Groups) or civil society advocacy• Closed, political spaces as more significant• Parliament, cabinet discussions

• Civil society pressure may help, but this is more important AFTER policies are established by political actors • Donors need to shift focus from civil to political

society

Three layers of problem-driven GPE analysis

Political economy

Vulnerabilities& concerns

Institutional/ governance arrangements & capacities

Evidence of poor outcomes to which GPE issues appear to contribute

E.g. repeated failure to develop solutions to lack of results in sectors. Infrastructure is constraint to growth but is not being improved

What are the institutional arrangements & are they capable, effective & efficient?Why are things this way? Why are policies or inst. arrangements not being improved?

Mapping of institutions: laws, regulations; responsible public bodies; formal and de facto rules of the game; analysis of integrity/corruption challengesAnalysis of stakeholders, incentives, rents/rent-distribution, historical legacies & earlier reform experiences; social trends & forces and how they shape stakeholder actions

Prob

lem

driv

en

False dilemma• Targeting versus universalism

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False dilemma• Wide variability across

countries about• Extent of collective

responsibility for those who are unable to provide for themselves

• Attitudes about distribution of opportunities and government’s role in equalizing opportunities and outcomes 27

Real Dilemma• When and how fast to move?• Constitutional changes: South Africa, Brazil (Rights-Based SN)

and paced implementation• Consensus on goals and commitment: US 1996 welfare

reform, Colombia health insurance reform 1990s (with new push with Right to Health)

• Crises

• Entrenched controversy: pilot, evaluate and scale-up if successfull while building political support: • Progresa 1997, Oportunidades 2000• MENA 2013? • Africa CTs (with remaining questions about domestic ownership)

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Real dilemma• Empower local government vs central control.

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Summary (2)

How you implement matters ! • Lowering barriers to participation

• Effective dissemination of information about the program • Minimize visits and waiting for application• Minimize documentation required, free-of-charge provision of documents attesting

eligibility• Introduction of one-stop or one-window system; Single application for multiple

benefits

• Lowering errors • Use multiple targeting methods combined• Cross-check the information provided by applicants against other public databases; • Perform home-visits to assess the means of the households and Frequent re-

certification

• Improving program administration• MIS, Staff training, Coordination,....

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Summary (3) • Global experience shows that effective safety nets can

be designed as productive, growth promoting, appropriate and sustainable

• It takes time and political will to build good safety nets and targeting systems. Efficient safety nets require the development of systems that allow the delivery of social services quickly, in an integrated way and at low costs.

• The World Bank can support these efforts as a global, multi-sectoral, and knowledge-driven agency, which is able to package global technical know-how, financing and convening power – each critically important for the safety nets agenda.

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More information

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www.worldbank.org/safetynetsEnrollment in the Safety Net How-toFrom Protection to Promotion, Chapter 4Governance and service delivery in SSN working paper

The Transfer project websitehttp://www.cpc.unc.edu/projects/transfer