Developmental Evidence Cash Transfers and Basic

Income

Ingrid van Niekerk (EPRI)BIEN Congress, Brazil 2010Friday July 1 2010

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Emerging global evidence on developmental social protection:implications for basic income in developing countries

Overview

1. Evidence on food security, nutrition and health

2. Evidence on pro-poor and inclusive growth

3. Cash transfers and social protection are developmental

4. Implications for Basic Income in developing countries

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Cash transfers yield impacts on food security, nutrition and health

•study of African pilots (IFPRI 2008)

•South Africa (Samson et al. 2010)

•Colombia (Ayala et al. 2005)

HH receiving cash transfers spend more on

food

•Mozambique (EPRI 2010)

•South Africa (Samson et al. 2004, 2010)

•Zambia (MCDSS/GTZ 2007)

Ben. receiving cash transfers experience less

hunger

•study of Latin American programmes (IFPRI 2008)

•South Africa (Duflo 2003)

•Bangladesh (Devereux et al. 2006)

•Mexico (Szekely 2001 and Britto 2005)

Children receiving social transfers tend to

be better nourished

•social transfers alone are often not sufficient to tackle severe malnutrition, which has multiple causes

•many studies fail to demonstrate improved health outcomes, in part due to methodological challenges

Some results on nutrition and

health impacts are perplexing

Most cash transfers buy predominantly foodUse of Cash Transfer by Program

0%

10%

20%

30%

40%

50%

60%

70%

80%

Food Education Health Other Savings &Investment

South Africa OAP Zambia SCTSKenya Cash Transfer for OVC Mozambique INAS (urban)Namibia Old-Age Pension (urban) Malawi DECTMalawi FACT

SOURCE: IFPRI 4

The distribution of social benefits in South Africa

0%

20%

40%

60%

80%

100%

0% 20% 40% 60% 80% 100%

Pre-transfer income

School education

Tertiary education

Health

Social assistance

Housing

Line of equality

cum

ula

tive

pro

po

rtio

n o

f b

enef

its

cumulative proportion of sample

SOURCE: South African National Treasury and Statistics South Africa

Lesotho demonstrates how social pensions build human capital for children

The world’s newest universal social pension, implemented in 2004

Formal evaluations still in progress

Costs 1.4% of GDP Supports children

increasingly living with older people (OVC)

Qualifying age 70

Lesotho6

Cash Transfers yield impacts on pro-poor and inclusive economic growth

•South Africa (EPRI)

•Mexico (IDS/ODI)

•Brazil (IPC-IG)

Strong evidence for middle-

income countries

•Mozambique (EPRI 2010)

•Kenya

•Zambia (MCDSS/GTZ 2007)

Anecdotal and emerging

evidence for low-income countries

•Social protection facilitates labour market engagement

•…and helps to manage social risk

Stronger evidence on

investment and risk management

effects

•social protection provides the poor and excluded with an economic stake in society

•facilitating pro-poor economic reforms

•and increasing the demand for better governance

Bigger questions on social

cohesion impacts

Social protection promotes better risk management and encourages investment

Higher investme

nt and growth

Risk Manage-

ment

Social

protecti

on

Social Transfers in South Africa support economic growth along multiple dimensions

Sub-Saharan Africa’s oldest social transfer programme

Costs 3% of GDP Substantial impact on

poverty reduction Extensive studies of

growth outcomes– Human capital– Labour markets– Macroeconomics

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0%

10%

20%

30%

40%

50%

60%

70%

Out of LF Unemp., nosearch

Unemp.,searching

Employed

Labor force status, March 2005

CSG households Non-CSG households

n=3462 n=1795

Cash transfers improve labour market participation and employment rates

Social pensions support local economies

A transformed pension system since democracy in 1990

Near-universal take-up (85%)

Costs 0.7% of GDP Supports labour

market participation, particularly for women

Namibia

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Cash transfers in Zambia: entrepreneurial and livelihoods investment

Pilot initiated in 2003 Targets the poorest

and most vulnerable 10% of households

Approximately 30% of the value of cash transfers invested, with high returns multiplying the value of the transfer and promoting growth

Similar to Brazil’s experience

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Propensity score matching techniques provide ex post evidence on agricultural resiliencePropensity score

13% agricultural attrition

8% agricultural attrition

Social protection

Poverty and inequality

Poverty gaps / headcounts and

Gini

Human capital

Nutrition, education, health

Risk manageme

ntEx post and ex ante

Social cohesion

Nation-building, inclusion, equity,

peace

Macro-economics

Crisis response, economic

restructuring

Social protection is about more than

reducing poverty - it is developmental

Mauritius

Social protection reinforces social cohesion, facilitating economic reforms that promote pro-poor growth

EXAMPLES

Mauritius

Botswana

Nepal

Papua New

Guinea

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Cash transfers reduce inequality in Botswana, supporting social stability and growth

A social pension since 1996

Universal take-up Costs 0.4% of GDP Social transfers reduce

inequality in one of the world’s most unequal societies— helping to stabilise conditions that promote economic growth.

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SOUTH AFRICA

South Africa- progressive realisation of “Comprehensive Social Security System”. Taylor Committee Report in 2002

BIG Campaign – Donation? Move slowly toward a universal approach State Old Age Pension-remove means test? CSG-extension to age 18Working age adults between 19 and 59?Soft Conditionalities on the CSG

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Technological Improvements

Secure cash machines that hold the cash and use biometric data to determine beneficiary

Smart card system-savings card, credit card

Bank by phone (popular in Kenya) – Empesa-remittance payment

More secure, easier and cheaper

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What do we need for BI to be successful implemented?

Political WillRights-based approachesState led –political support Taxable capacity – middle income countryInstitutional capacity on both delivery and

administrationIntegrated provision- cash + complementary

services 19

Obrigado

Thank you

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Namibia: BIG Pilot ProjectShows that BI has the desired effects of

poverty reduction and economic developmentProject started in January 2008Grant administered to 1000 people in town of

Omitara- scheduled to run for two years(Large country with small population and

very high income inequality)

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Namibian Basic Income Pilot: First Universal Cash PilotIn January 2008, a Basic Income Grant (BIG) pilot

project began in the Otjivero-Omitara area 100 kilometres east of Windhoek.

All residents below the age of 60 years receive a Basic Income . Grant of N$100 per person per month, without any conditions being attached.

The grant is being given to every person registered as living there in July 2007, whatever their social and economic status.

This BIG pilot project is designed and implemented by the Namibian Basic Income Grant Coalition (established in 2004)

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Main Findings

Weight-for-age has improved significantly in just six months from 42% of underweight children to only 17%.

There is strong evidence that more people are now able to engage in more productive activities.

the BIG fosters local economic growth and development. Several small enterprises started in Otjivero, making use of the BIG money being spent in the community.

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More than double the number of parents paid school fees. Parents prioritized buying of school uniforms

More children are attending school and the stronger financial situation of the school (school fees) has helped the school to buy more school materials

Drop out rates at school were 30-40% before the introduction of a BIG, by July 2008 these rates were reduced to a mere 5%.

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Increased use of the settlement's health clinic since the introduction of the BIG. Residents now pay the N$4 payment for each visit and the income of the clinic has increased fivefold.

Several cases document that young women have been freed from having to engage in transactional sex.Economic and poverty-related crime (illegal hunting,

theftand trespassing) has fallen by over 20%.

The BIG has helped to achieve progress towards all eightMillenium Development Goals.

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