Income-transfer programmes with

The first type of CTP comprises programmes whose main objective is to ensure a basic level of consumption for poor families. This public policy response is based on the assumption that the main problem facing poor families is lack of income and the inability to enter income-generating pathways, especially formal employment (see diagram III.1).

The programme closest to this definition is Brazil’s Bolsa Família grant programme, whose paramount objective is to provide a wage supplement to the poorest families (Britto, 2008). In this programme, the

4 _{As the typology of this chapter is analytical and not empirical, there may be programmes} that elude the chosen categories or categories that tend to overlap in certain situations. In neither case does this undermine the analytical strength of the typology, as it provides an insight into how co-responsibility transfer programmes operate in relation to their objectives and the instruments used. It also provides a framework for analysing the wide range of programmes that have emerged over time and for considering how these programmes can be integrated into the social protection architecture.

notion of co-responsibility extends to the role of the State, where the cash benefit is considered as a right of citizenship and the attached health and education conditions, as part of a bid to improve access to those rights.

Diagram III.1

TYPE-1 CO-RESPONSIBILITY TRANSFER PROGRAMMES: INCOME-TRANSFER PROGRAMMES WITH SOFT CONDITIONALITY

Integrar circuitos política pública Asegurar mínimos (dimensiones) Problems Beneficiaries Objectives Lack of income Limits to citizenship Medium to high (availability + quality) Importance of supply Low incomes Vulnerable to shocks Increase incomes Basic income

Source: Prepared by the authors.

Programmes placing greater emphasis on income transfers might be assumed to pay little heed to service provision. This is not the case because, inasmuch as the provision of benefits and beneficiaries’ continuance in the programme hinge upon compliance with the respective conditionalities, there is an obligation to at least ensure that services are available. In addition, where a CTP is oriented towards the exercise of people’s rights and citizenship, the quality of the services provided becomes crucially important, as poor quality services lead to infringement of such principles.

(a) Operating rationale

Given that type-1 CTPs identify the problem as lack of income, the chosen means for achieving the programme’s objectives is a cash transfer (see diagram III.2).

As the transfer amount is usually intended to cover the lack of a minimum income, it is calculated in line with the cost of a basic food basket (extreme poverty line). There are two types of transfer: a flat-rate transfer and a differentiated transfer that varies according to family composition. For example, Bolsa Família provides a basic benefit to

families in extreme poverty, regardless of the number of family members, calculated on the basis of the value of the extreme poverty line. In addition to this basic benefit, families may obtain a top-up transfer, called “variable benefit”, depending on family composition, up to a maximum number of beneficiaries. Transfers calculated on the basis of family composition provide larger benefits to households with a higher number of eligible members (children up to a certain age, pregnant or nursing mothers and older adults), taking into account families’ consumption needs according to their structure and their members’ stage of life.

Diagram III.2

TYPE-1 CO-RESPONSIBILITY TRANSFER PROGRAMMES: OPERATING RATIONALE

Indicadors of poverty and income inequality Lax monitoring

and penalties Calculated based

on the value of the food basket

Cash transfer Conditions _outcomesExpected

Acts as an income supplement Reduction in poverty and inequality Reinforce and protect human capital

Source: Prepared by the authors.

There are arguments to justify both types of transfer. Although prioritizing the composition of the family group makes it possible to address the specific vulnerabilities faced by different types of household, Stecklow and others (2006) point out that a flat-rate transfer would avoid “perverse incentives” that might encourage large families to keep having children. Accordingly, transfers differentiated by family composition tend to impose a maximum number of beneficiaries or a maximum amount per family. In some cases, this capping is combined with a sliding scale of diminishing benefits for reasons of economies of scale in consumption. In Argentina’s Families for Social Inclusion programme, for example, the transfer amount began with US$53  per month for families with two children under the age of 19 but, as from the third child it increased by only around US$12  per child up to a maximum of six children, with a ceiling of US$101  per family.

As conditionalities do not play a key role in the operation of type-1 CTPs, verification tends to be weak, or else penalties for non-compliance are moderate. For example, whereas in Oportunidades, non-compliance with conditionalities results in immediate cessation of the cash benefit, in

Bolsa Família, payments are suspended for the month in question but the

amounts continue to accumulate and are refunded once the family certifies resumed compliance with conditionalities. In addition, Bolsa Família attaches great importance to supporting families that fail to meet their commitments through its teams of municipal social assistance workers, who ascertain and try to resolve any issues affecting non-compliance

(Bastagli, 2009; Mesquita, 2009).5 _{Where such a scheme of conditionalities is}

supplemented by flat-rate transfers, or where transfers make no distinction between education or nutrition and health outcomes, the design of the “single transfer-single condition” dyad becomes more complex, further compounding control problems.

As some programmes have been extended and institutionalized without imposing conditionalities or defining exit mechanisms, they tend to resemble other non-contributory social protection programmes. A good example is Ecuador’s Human Development Grant, whose main objective is to ensure a certain consumption level for the poorest families, and which pays an unconditional transfer of US$35  to older adults and people with disabilities. Households with children under the age of 18 years that satisfy certain education and health conditionalities receive the same amount. However, given its control weaknesses, both variants of the programme operate in a similar fashion. So, even though the Human Development Grant defines itself as a CTP, the fact that it fails to verify beneficiary compliance with conditionalities makes it a purely income- transfer programme.

In other cases, type-1 CTPs have tended to become assimilated with the concept of a universal minimum income targeted at the very poorest. A case in point is Brazil (see annex II.2), whose basic income law establishes the right to a benefit covering basic food, health and education costs for all Brazilians. The law has been used as a basis for instilling the idea of a universal minimum income revolving around benefits

from Bolsa Família (Medeiros, Britto and Veras Soares, 2008).6 _{This also}

explains why Bolsa Família focuses more on minimizing exclusion errors

5 _{Social Assistance Referral Centres (CRAS) or Social Assistance Specialized Referral} Centres (CREAS), via the Comprehensive Family Support Programme (PAIF).

6 _{Law 10835 of 2004 establishes this right for all Brazilians and for foreigners who have} been resident in Brazil for more than five consecutive years, irrespective of income. However, given the country’s budgetary constraints, the law stipulates that delivery of the benefit is subject to sufficient funding being available and proposes a staged expansion of benefit coverage, giving priority to the neediest sector of the population (Medeiros, Britto and Vera Soares, 2008).

than on adjusting mechanisms to exclude people who do not fall into the beneficiary category, as with the Oportunidades programme (Veras Soares, Ribas and Osorio, 2007).

This goes to show that there must be clear objectives for introducing conditionalities. The rationale for conditionalities is central to understanding the decision to include them rather than to maintain non-contributory benefits without conditionalities. Experience of CTPs in the region has shown that conditionalities can be established for political reasons (to make it easier to obtain financing or to comply with donor requirements, persuading those in the middle- and upper-income bracket of the programme’s desirability), for ethical and moral reasons (helping only the deserving), or for instrumental reasons (to take the opportunity

to improve basic social indicators).7

In this and the other two types of CTP it is important to inform beneficiaries promptly of the meaning and role of programme conditionalities. Schady and Araujo (2006) have demonstrated the importance of communication campaigns and of informing beneficiaries. In Ecuador, it was discovered that some families had not realized that the benefits of the Human Development Grant were subject to conditionalities, whereas other families had, which led to different responses with different outcomes. Families who knew that the transfers imposed conditionalities sent their sons and daughters to school, increasing their school enrolment rates, which was not the case with families that believed no comitments were required in order to receive benefits.

This could support the introduction of conditionalities even where verification is weak. Some assessments have shown positive externalities associated with the mere existence of a programme in the community, with the result that even non-beneficiaries (those not receiving transfers and not subject to the conditions) increase the use of social services (Veras Soares, Ribas and Hirata, 2008; Lehmann, 2009). This means that beneficiaries’ perceptions regarding compliance with conditionalities can often be powerful enough to obviate the need for strict systems of control and penalties for non-compliance in order to produce an effect on behaviour, although it is crucial for the supply of related social services to be large enough to cover the increased demand created by the programmes.

Another role that transfer programmes with weak conditionalities could play is to insure against emergencies and disasters, whether they

7 _{In 2007, when a representative sample of Argentina’s population was asked the question} “Do you think that people receiving [benefits from] plans should do something in return?” for the Survey of Perceptions of Social Policy (EPPS), 93% of respondents answered in the affirmative (Cruces and Rovner, 2008).

be economic crises, or natural or other disasters (Veras Soares, 2009a).8

Such events typically produce sudden losses of income to which poor households tend to respond with strategies jeopardizing the human development of their members, especially minors. In the context of the recent food price crisis, Lustig (2008) highlights the importance of social protection networks to contain the consumption level of households facing this kind of shock, in addition to safeguarding them against loss of assets. After studying this relationship in relation to the crisis in Nicaragua’s coffee sector, which went on to cause an acute economic crisis, Maluccio (2005) shows the positive outcomes of the co-responsibility transfer programme Social Protection Network (RPS) on household strategies for weathering the crisis. The programme was said to have enabled beneficiary households to: mitigate the decline in consumer spending (and even to increase it in some cases); keep its members working the same number of hours as before the crisis (unlike non-beneficiary households, whose members were forced to work significantly longer hours); increase school enrolment rates; and reduce child labour.

Type-1 CTPs can operate in two modes: one continuous, where families in situations of poverty and income vulnerability receive constant access to benefits; and the other temporary, provided only as relief in emergencies arising from natural disasters, economic crises or other events affecting their economic vulnerability. An example of the second mode is Ecuador’s “Emergency Grant” cash transfer, which is triggered whenever a state of emergency is declared somewhere in the country. Even though the transfer does not include conditionalities, it is part of Ecuador’s Social Protection Programme (PPS), which also includes the Human Development Grant. Other emblematic cases of emergency relief programmes are Nicaragua’s Crisis Response System (SAC) (for natural disasters) and Uruguay’s National Social Emergency Response Plan (PANES) (for economic crises). In these CTPs, the underlying idea is that a scheme of conditionalities can help to prevent the loss of human capital through family strategies of curbing consumption.

Veras Soares (2009a; 2009b) emphasizes that, where they already exist as part of public policy, CTPs can be turned into crisis insurance mechanisms but that it is unwise to implement them while a crisis is under way because of their heavy requirements in terms of installed capacity and financial resource commitment. For CTPs to be useful instruments in

8 _{Some co-responsibility transfer programmes, such as Nicaragua’s Crisis Response} System (SAC) or Ecuador’s Bono de Emergencia emergency cash transfer, were designed specifically to address emergencies. Others, such as the Honduran Family Allowance Programme (PRAF), Colombia’s Families in Action programme and the Dominican Republic’s Solidarity programme, emerged out of economic crisis, but have tended to spread and become institutionalized with the long-term aim of attacking poverty.

such circumstances, their information, beneficiary selection and benefit payment structures need to be specially adapted and properly coordinated to enable them to operate flexibly enough in an emergency. However, this

is not the case with many of the region’s existing programmes.9

(b) Expected outcomes

The effectiveness of CTP cash transfers in terms of reducing poverty and income inequality differs according to whether the impact is measured on national indicators or on programme beneficiaries (ECLAC, 2010a; Cecchini and Madariaga, 2010). In the case of Bolsa Família, transfers have been found to reduce the poverty gap, extreme poverty and the Gini coefficient (Veras Soares and others, 2006; Veras Soares, Ribas and Osorio, 2007). However, their impact on nationwide poverty levels is often

moderate and can even worsen poverty where other dynamics exist.10

In view of the above, and in line with other studies (Maluccio, 2005; Fiszbein and Schady, 2009), ECLAC (2010a) shows that, while the impact of conditional cash transfers and other non-contributory public transfers may be insignificant across households as a whole, for the households actually receiving them, the impact is great. In rural areas, per capita transfers account for an average 37% of the value of the extreme poverty line and 21% of the poverty line. In urban areas, transfers average 31% of the extreme

poverty line and 15% of the poverty line.11 _{In the case of Brazil (de Oliveira}

and others, 2007) Bolsa Família beneficiaries have been found to have significantly higher total household expenditures than those receiving no benefit of any kind, especially on clothing and children’s education. However, no significant changes in food consumption are apparent, with the widest disparities among low-income beneficiaries, which would seem to be true of a number of other CTPs (Fiszbein and Schady, 2009).

Nonetheless, consideration should be given to the sustainability of cash transfers over time (Bastagli, 2009). Achieving the goal of poverty reduction poses a real challenge for any social policy seeking long-

9 _{Veras Soares (2009b) gives the example of beneficiary selection by proxy means} tests, which are not sensitive to short-term variations in people’s income and would therefore not provide the required flexibility to incorporate new beneficiaries in crisis situations. Based on the above, the author shows that, as many co-responsibility transfer programmes have been designed for other purposes, their instruments do not necessarily conform to the requirements of crisis events.

10 _{In the case of Mexico, even though evaluations of the Oportunidades programme have} found positive effects on poverty gap and severity indices (Fiszbein and Schady, 2009), its contribution to the incidence of overall poverty or inequality has not been established clearly. Even though the programme was fully operational between 2006 and 2008, food poverty increased by 5.4% nationwide (Rangel, 2009) while Mexico’s per capita income increased by around 7% (ECLAC, 2010a).

term outcomes rather than mitigating poverty at a given point in time. A number of authors (Maluccio, 2005; Fiszbein and Schady, 2009; Moore, 2009b) cite Nicaragua’s Social Protection Network as an example of positive outcomes on poverty and inequality indicators, owing to the transfer amounts and effective targeting. In addition, this programme was reported to have improved consumption by beneficiary households in both quantitative and qualitative terms (increased intake of foods with a higher nutritional content). However, this lasted only for as long as the loan was forthcoming from the Inter-American Development Bank (IDB) funding the programme (between 2000 and 2006), after which the programme was discontinued, along with its benefits and, as expected, the effects turned out to be merely temporary. So, unless CTPs are designed as long-term programmes from the outset, the impact on incomes is unlikely to last after programmes have ceased.

These considerations about the sustainability of results are relevant to the debate on permanent versus temporary support and the design of effective exit strategies, where exit is an option (Medeiros, Britto and Veras Soares, 2008). To assess the impact of type-1 CTPs, it is not enough to measure the impact of transfers on total family income and to analyse the extent to which they enable families to rise above extreme poverty or poverty lines, or the extent to which transfers help to sustain income levels in times of crisis. It is also necessary to assess the effectiveness of exit strategies in building the capacity of households and enabling them to become autonomous.

Another important factor is the cost-effectiveness of interventions. A number of authors suggest that, if income transfer is the sole objective, the best option is an unconditional transfer, given the costs associated with control measures and other institutional infrastructure elements required for a CTP (de Janvry and Sadoulet, 2006a; Samson, 2006; Freeland, 2009). Evidence shows that there is no clarity regarding the costs of such procedures, especially in the stage of verifying conditionalities. A study of Honduras, Mexico and Nicaragua (Caldés, Coady and Maluccio, 2006) shows that the combined targeting and control costs can total as much as 60% of the annual budget of a programme like Progresa. However, Fiszbein and Schady (2009) warn that these costs depend on the programme implementation stage, citing the study by Grosh and others (2008), which states that, for 10  countries, the costs of payment implementation and verification of conditionalities, plus additional support services, average

less than 12% of the budget.12

12 _{These analyses are beset by major methodological problems for making intercountry} comparisons, stemming from the non-comparability of administrative costs by function. Countries’ institutional arrangements and systems for recording administrative

2. Demand incentive programmes with