Public works programs (PWPs) are popular development interventions due to their potential 'double dividend' of transferring income to the poor while at the same time creating public infrastructure. However, PWPs are costly and demanding from an administrative perspective and it is not clear whether they are the most cost-effective intervention to reduce poverty. Therefore, an assessment of PW programs needs to understand which benefits and costs these programs entail relative to other interventions, and whether or not the extra cost can be outweighed by generating benefits over and above those of alternative interventions, such as Cash Transfer programs. This paper seeks to identify these benefits, and develops a conceptual framework that highlights four mechanisms through which PWPs could strengthen the productive capacity of poor households beyond the effects of Cash Transfers: productive investments, labor market effects, skills development, and increases in trade and production. It then reviews available empirical evidence from PWPs in developing countries. The results suggest that PWPs can induce productive investments via income and insurance effects when the program is sufficiently reliable and long-term. PWPs can also have positive welfare effects by raising wages, but potential adverse effects on labor markets have to be taken into account. Implicit or explicit training components of PWPs do not seem to increase the employability or business earnings of participants. Finally, there is only scant empirical evidence on the productive effects of the public infrastructure generated by PWPs, and further research is crucial to understand and quantify those effects. This paper concludes that PWPs are only preferable over alternative interventions if they generate substantial investments among the target group, if there is clear evidence that private-sector wages are below equilibrium wages, or if the public infrastructure generated in PWPs has substantial growth effects.
Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. Sharing is a norm in many societies. We present a theoretical model on the trade-off between sharing and investment which we test on data from tailors in Burkina Faso. The empirical results support the idea that there are two behavioural patterns: entrepreneurs following an 'insurance regime' comply with sharing norms, are insured but reduce investment in their firm, whereas entrepreneurs in the 'growth regime' are not insured but take undistorted investment decisions. The choice of regime depends on the redistributive pressure, the willingness to take risk, and the return on investment.JEL Classification: D13, D22, D92, O12, O43
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