DEVELOPMENT ECONOMICS
DEVELOPMENT ECONOMICS APPLICATIONS
To help us move from theory to application, we will look at several common interventions and policies that target particular determinants of growth. We will look at the evidence around some of these interventions and their effectiveness.
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Module Sections
Cross-Cutting Policies
What are some holistic policies for economic development?
While it is tempting to approach development challenges as separate issues that require unique responses, many policies approach development in an integrated manner. These holistic policies aim to overcome development challenges through several different pathways.
In this section, we will take a closer look at two interventions that have grown in popularity over the past decade – Cash Transfers and the “Graduation Program.”
Cross-cutting development programs try to empower poor families
Cross-cutting policies often recognize that development challenges are more complicated than solving a health issue, educating a child, or offering credit.
Cash Transfer Programs
Cash transfer programs are a common intervention that provide regular payments to poor families, helping them cover living expenses and mitigate economic shocks
The Graduation Program
The graduation program provides holistic livelihood support to beneficiaries – financial, training, capital – to help them move out of poverty
Cash transfer programs have been used by governments for over two decades
Program Overview
Cash transfer programs aim to empower and support individuals and families to invest in their own self-identified needs. Cash transfers are often conditional and require beneficiaries to meet certain goals or requirements (e.g., attending school, receiving immunizations, etc.)
Target Audience
Programs typically target poor individuals or families that fall under a specified income threshold, or certain populations that meet strict program criteria (e.g., pregnant women, women with children, etc.)
Goal
- Provide individuals/families with cash to invest in family needs.
- Incentivize positive behaviors like vaccination, school attendance, etc.
- Replace often burdensome and complex in-kind support programs.
Program Design
Cash transfer programs have been more widely used over the past two decades by governments and NGOs. Program designers have to address some of the following aspects:
Targeting – Who will qualify for a cash transfer?
Labeling – Will any information accompany cash transfer, especially information regarding spending?
Amount – How large should a cash transfer be?
Modality – How are beneficiaries paid?
Two of the oldest programs in Latin America have shown impacts on a variety of outcomes
Progresa/Prospera Program
A well-known conditional cash transfer program in Mexico, this program provided cash transfers to mothers, contingent on children attending schools and health centers.
Evaluation Findings
Evaluations of the program found positive impacts on education, health, and nutrition, including the following:
- Increase in average schooling duration by 8-10 months
- Reduction in anemia prevalence among children by ~12 percentage points.
- Significant reduction in rural poverty
Bolsa Familia Program
A 2003 conditional cash transfer program in Brazil that requires cash recipients to ensure school attendance and vaccination of all children.
Evaluation Findings
A World Bank analysis of the program found:
- Improvements in key education indicators, including enrollment, progression, and lower dropout rates
- Administrative gains by streamlining several previously existing welfare programs
- Expanded social welfare access to poor families who previously were unable to access safety nets.
Learn how cash transfer programs are effective tools for promoting development
An Overview: Cash Transfer Programs
Manoj Mohanan is an applied microeconomist, focusing on health and development economics, with a background in medicine and public health. His research focuses on topics related to health and health care in developing countries including: performance-based contracts, measurement of provider quality and performance, social franchising, and social accountability / monitoring. He also studies the role of subjective expectations and beliefs in health care behavior. Several of his projects feature field experiments, policy interventions and evaluations.
The graduation program is a holistic intervention that gives families a variety of inputs
Program Overview
In contrast to a straight-forward cash transfer program, the Graduation Program consists of six complementary components, each designed to address specific constraints facing ultra-poor households.
- Capital asset transfer: One-time transfer of productive assets, such as livestock or supplies for petty trade
- Technical skills training: Training to manage the productive asset
- Financial Support: Regular cash or in-kind support for a few months to a year
- Savings Support: Access to a savings account, or encouragement to save
- Coaching Sessions: Frequent home visits by implementing partner staff to provide accountability, coaching, and encouragement
- Health Services: Health education, health care access, and/or life skills training
The graduation program has shown positive impacts in settings worldwide
Program Impacts
Randomized evaluations of the graduation program have taken place in Bangladesh, India, Pakistan, Ghana, Peru, Honduras, and Ethiopia.
Economic Impacts
- Evaluations found household consumption increased by 5.8 percent, on average.
- Improved economic outcomes persisted well after participation.
- These encouraging results held up across a variety of implementing partners across the 7 countries.
Social Impacts
- Participants in the program showed significant psychological improvements, reporting higher levels of happiness and reduced stress levels.
- Participants also showed increased levels of political participation in some contexts.
Program Sustainability
On average, programs demonstrated positive returns on investments within three years of beneficiaries participating in the program. At some program sites, household consumption totaled two to four times more than the cost of the program inputs after three years.
Our framework for determinants of economic growth helps us understand how specific policies can potentially drive growth. We supplement this framework with evidence to show how current policies lead to impact.
References
- World Bank Group. (2014, November 19). A Model from Mexico for the World. World Bank.
- World Bank Group. (2020, April 22). Strengthening Conditional Cash Transfers and the Single Registry in Brazil: A Second-Generation Platform for Service Delivery for the Poor. World Bank.
- World Bank Group. (2013, April 24). Graduation Program: Creating Pathways out of Extreme Poverty into Sustainable Livelihoods. World Bank.
- Abdul Latif Jameel Poverty Action Lab (J-PAL). 2015. “Building stable livelihoods for the ultra-poor.” J-PAL Policy Insights. Last modified September 2015.
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