Welfare Programs and Labor Supply in Developing Countries - Experimental Evidence from Latin America

Abstract

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. Abstract: This paper studies the effect of welfare programs on work incentives and the labor supply of adults in developing countries. The document builds on the experimental evaluations of three programs implemented in rural areas: Mexico's PROGRESA, Nicaragua's Red de Protección Social (RPS) and Honduras' Programa de Asignación Familiar (PRAF). The impact of welfare on labor supply has been widely studied in developed countries, where most recent initiatives attempt to mitigate negative effects on work incentives. The programs under study are conditional cash transfers (CCT), which combine monetary benefits with incentives for curbing child labor and fostering the accumulation of human capital. Unlike their counterparts in developed economies, however, they do not account for potential impacts on the labor supply of adults, and there is little systematic evidence on this aspect despite a wealth of empirical studies on their intended outcomes. Comparable results for the three countries indicate mostly negative but small and non-significant effects of the programs on the employment of adults, no reallocation of labor between agricultural and other sectors, and a reduction in hours worked by adults in eligible households in RPS. Moreover, PROGRESA had a positive effect on beneficiaries' wages. The programs did not imply major disincentives to work, despite substantial transfers, but they had some effects on local labor markets. This mechanism is related to recent findings on the indirect impact of CCTs on ineligible households, and implies that future evaluation studies and designs should account for the equilibrium effects of the interventions. Terms of use: Documents in EconStor mayKeywords: welfare programs, income support, labor supply, adult work incentives, conditional cash transfers, randomized control trials, developing countries. JEL Codes: J08 -J22 -I38 * Corresponding authors: malzua@cedlas.org, gcruces@cedlas.org and laurari@iadb.org. This paper originates in a section of the report "Labor supply responses to conditional cash transfer programs. Experimental and non-experimental evidence from Latin America". The full report was prepared for the IDB by a team directed by María Laura Alzúa, Guillermo Cruces, Leonardo Gasparini and Laura Ripani. The team members, Javier Alejo, Andrés Ham, Sergio Olivieri and Mariana Viollaz, from CEDLAS-UNLP, provided outstanding research assistance in different stages of the report. The authors wish to thank Santi...

Cash Transfer Programme, Productive Activities and Labour Supply: Evidence from a Randomised Experiment in Kenya

“…Studies of Bolsa Familia in Brazil (Ribas and Soares, 2111; Foguel and Paes de Barrios, 2010; Teixeira, 2010), PROGRESA in Mexico (Parker and Skoufias, 2000; Skoufias and di Maro, 2008; Alzua et al, 2010), the Red de Proteccion Social in Nicaragua (Maluccio and Flores, 2005; Maluccio, 2010; Alzua et al, 2010), the BDH programme in Ecuador (Edmonds and Schady, 2008) and PRAF in Honduras (Alzua et al, 2010; Galiani and McEwan, 2012), using a variety of approaches, have not found significant impact on participation in wage employment by adults, female or male, nor reallocation between agricultural and non agricultural sectors. There is some evidence, however, that CCTs have modestly reduced time spent working, for males in Nicaragua (Maluccio and Flores, 2005) and females in Brazil (Teixeira, 2010), and substitution between wage and domestic home work in Brazil (Ribas and Soares, 2011).…”

The Impact of Cash Transfer Programmes on Youth and Adult Labour Supply: Evidence from Lesotho and the Philippines

“…PROGRESA leads to an increase only in the intensive margin of women labour supply (Alzúa et al, ). This result is consistent with the idea that beneficiary women of CCTs have more time available, because children spend more time at school.…”

How Differences in Cash Transfer Sizes Affect Work Allocation Decisions: Evidence from Cross‐Country Comparisons in SSA

“…Alzúa et al . () is the only study that looks into the effects of (conditional) CTs on labour supply in a cross‐country context using data from three major welfare programmes in South America. By using a binary treatment approach they find statistically insignificant effects.…”