From Protection to Production: The Productive Impacts of Social Cash Transfers Paul Winters Department of Economics, American University Building Resilience and Assets for Food Security: Evidence and Implications for Feed the Future presented by USAID and the Assets and Market Access CRSP September 29-30, 2011, Washington DC

Motivation for studies Objectives of Social Cash Transfers programs Social protection Reduce consumption poverty Induce investment in child health and education Break the intergenerational transmission of poverty

Motivation Criticism of SCTs Focus solely on long-term poverty reduction Weak link to productivity  human capital, skills, labor market insertion Agriculture? Miss opportunities to complement broader development programs, particularly productive investment Investment in human capital to what end Intergenerational transmission of welfare receipt? Productive vs. social (unproductive?) investment

Motivation Productive cash transfers Can they be used for productive purposes as a complement to broader development agenda? Agricultural technology adoption Agricultural asset accumulation With land formalization projects Promoting microenterprises… Under what conditions?

Social cash transfers and productive choices Transfers can influence consumption and production decisions when markets fail or are incomplete Transfers as a source of liquidity Credit constraints potentially limit productive spending and investment Transfers can induce spending and investment altering production and the allocation of resources, including labor

Social cash transfers and productive choices Transfers as a secure source of income Insurance and credit market imperfections limit the ability of poor households to smooth consumption Poor households take action to manage risk ex ante and cope with risk ex post Transfers provide regular income uncorrelated with other income sources, potentially altering risk management and coping strategies, and therefore production choices

Objective To look beyond the social protection function of SCT programs and analyze the impact of these programs on productive activities Mexico’s Oportunidades Todd, J., Winters, P. and Hertz, T., “Conditional Cash Transfers and Agricultural Production: Lessons from the Oportunidades Experience in Mexico.” Journal of Development Studies 46(1), Malawi Social Cash Transfer Program Covarrubias, K., Davis, B. and Winters, P., “From Protection to Production: Productive Impacts of the Malawi Social Cash Transfer Scheme.” Boone, R., Covarrubias, K., Davis, B. and Winters, P., “The Impact of Social Cash Transfers on Agricultural Production: The Case of Malawi.”

Mexican Oportunidades program Initiated in 1997 as PROGRESA in marginal rural areas (506 localities in 7 states) Targets poor using proxy means test Transfer primarily go to women Food/nutrition and education transfers conditioned on health and education behavior

Oportunidades: Data and method Random assignment of eligible communities to treatment and control (320 treatment 186 control) 9936 households – 6281 treatment, 3655 control Baseline: 1997 census and March 1998 survey Follow-up: Oct 1998, March 1999 and Nov 1999 Questionnaire limited in production questions Own food production, land use, livestock, agricultural spending Different agricultural seasons

Consumption from own production Control meanOct 1998 Control mean May 1999 HH consumes from own production ** (0.035) ** (0.023) Per capita value of own production *** (0.008) (0.517) Number of food groups from own production *** (0.004) *** (0.011) Number of foods from own production *** (0.003) *** (0.004) P-values in parenthesis

Cons. own production: Food groups Control meanOct 1998 Control mean May 1999 Cereals (0.278) (0.124) Beans * (0.080) (0.895) Fruit ** (0.024) (0.282) Vegetables (0.964) ** (0.031) Meat ** (0.012) (0.113) Eggs (0.455) (0.536) P-values in parenthesis

Agricultural investment and spending Control meanOct 1998 Control mean May 1999 Use land ** (0.048) (0.203) Per capita hectares of land use * (0.094) (0.378) Own livestock * (0.060) ** (0.037) Per capita livestock ownership * (0.099) *** (0.007) Agricultural spending ** (0.013) (0.321) Per capita agricultural spending (0.478) (0.403) P-values in parenthesis

Effects by land holdings Consumption from home production Landless & 0-3 hectares: similar to general effects >3 hectares: no effects Cons. from own productions by food groups Landless & 0-3 hectares: similar to general effects >3 hectares: effects on fruit in Oct Agricultural investment and spending Landless: Only land use effects and livestock on Oct 0-3 hectares: Land area effects, strong livestock effects (Oct and May) and agricultural spending in Oct >3 hectares: no effects

PROCAMPO and Oportunidades PROCAMPO Decoupled cash transfer provided to compensate ( ) staple producers given expected impact of NAFTA 34% receive PROCAMPO—22% receive both Highly agriculturally oriented Impact of Oportunidades on PROCAMPO producers Impact on all households not just PROCAMPO But significantly larger impact of Oportunidades for PROCAMPO recipients on own food consumption (cereals), land use, livestock ownership, agricultural spending

Malawi Social Cash Transfers Initiated in 2006 with intention to reach poorest 10% of population Expanding with hope of reaching 300,000 households by 2015 Targets ultra poor, labor constrained households— geographic combined with community targeting within Village Development Groups (VDGs) Unconditional cash transfer but “encouraged” to invest in children (soft conditions)

Malawi SCT: Data and method Evaluation Random assignment of eight VDGs into treatment and control in Mchinji district 751 households – 386 treatment, 365 control Baseline: March 2007 Follow-up: Sept 2007 and April 2008 Questionnaire limited in production questions Agricultural assets, some time use, own production

Agricultural assets (preliminary) TotalLabor>0Labor=0 Male head Female head Hoes 0.13*** (0.000) 0.10** (0.044) 0.16*** (0.007) 0.02 (0.755) 0.19*** (0.000) Sickles 0.29*** (0.000) 0.23*** (0.000) 0.34*** (0.000) 0.19*** (0.000) 0.34*** (0.000) Goats 0.48*** (0.000) 0.58*** (0.000) 0.41*** (0.000) 0.43*** (0.000) 0.52*** (0.000) Chicken0.59*** (0.000) 0.70*** (0.000) 0.50*** (0.000) 0.58*** (0.000) 0.60*** (0.000) P-values in parenthesis

Time use (preliminary) Sept 07April 08 Own farm (0.400) 0.12*** (0.000) Casual labor -0.33*** (0.000) -0.44*** (0.000) Casual labor days -2.32*** (0.000) -3.00*** (0.000) Household work 0.14*** (0.000) 0.14*** (0.000) P-values in parenthesis

Source of food: Sept / Apr (preliminary) Own ProductionPurchaseGift Cereals+ / + - / - Tubers+ / + - / - Pulses+ / + 0 / 0 Vegetables+ / + - / - Animal products+ / + 0 / 0 Fruits+ / + 0 / 0 Regular maize flour+ / 0+ / +- / - Fine maize flour+ / + - / -

Conclusions SCTs, while linked to long-term human capital investment, have an impact on productive decisions Crop/food diversification, agricultural spending, time use, land use, investment Impacts are evident among land poor (Oportunidades) and poor/labor constrained (Malawi) Impact possible linked to credit and insurance market imperfection

Conclusions Impacts appear greater for those with agricultural potential (PROCAMPO) Targeting agricultural households may induce greater productive impacts Suggests possibility of using productive cash transfers Under what conditions? Need for further analysis FAO/UNICEF funded by DFID  From Protection to Production

New CTs in SSA accompanied by rigorous impact evaluation Malawi SCT Mchinji pilot, Expansion, Kenya CT-OVC Pilot Expansion, Mozambique PSA Expansion, Zambia Kalombo pilot, 2005 Monze pilot, Expansion and child grant, South Africa CSG Retrospective and expansion, Ethiopia PNSP, Regional minimum social protection package, Ghana LEAP Pilot, Lesotho CGP Pilot, Uganda, begins in 2011 Zimbabwe, begins in 2011 Tanzania, TASAF

FAO/UNICEF funded by DFID From Protection to Production Countries and programs Formally: 1)Lesotho Child Grant Program (baseline 2011, follow up 2012) 2)Ethiopia Tigray SP package (baseline 2011, follow up 2012) 3)Malawi SCT expansion (baseline 2011, follow up 2012) 4)Kenya CT-OVC (2 nd follow up 2011) 5)Ghana LEAP (follow up 2012) 6)Zimbabwe SCT (baseline 2012, follow up 2013) Informally: 1)Zambia SCT (baseline 2010, follow up 2012) 2)South Africa CSG (retrospective, 2010)

Strengthen data collection and analysis Design, pilot and supervise implementation of additional modules in household surveys – Analyze household economic decision making on productive activities and labor allocation; climate change adaptation; risk coping; time use and social networks using baseline and follow up data---disaggregated by gender Economic “linkages” questions throughout household questionnaire, as well as business enterprise survey – Simulate local economy impacts using village SAM/CGE models Integrate qualitative/quantitative design and methods Lead a research network on impact evaluation of CT programs in SSA