Principal investigator: Viviane Pires Ribeiro
Article title: DEBUNKING THE STEREOTYPE OF THE LAZY WELFARE RECIPIENT: EVIDENCE FROM CASH TRANSFER PROGRAMS
Article authors: Abhijit V. Banerjee, Rema Hanna, Gabriel E. Kreindler and Benjamin A. Olken
Location of the intervention: Philippines, Honduras, Indonesia, Mexico, Morocco and Nicaragua
Sample size: Seven randomized controlled trials
Main theme: Job market
Type of Intervention: Impacts of government income transfer programs on labor supply.
Primary variable of interest: Job offer
Evaluation method: Other – Randomized controlled trials
Evaluation Context
Government income transfer programs for low-income individuals are becoming increasingly common in developing countries. A 2014 review of programs worldwide by Gentilini, Honorati, and Yemtsov found that 119 developing countries have implemented at least one type of unconditional income assistance program, and 52 countries have conditional income transfer programs for the most economically vulnerable families. This totals 1 billion people in developing countries participating in at least one assistance program. Some studies show that these programs help reduce poverty, improve educational outcomes, and increase access to healthcare. However, some politicians and even the general public express concerns related to the discouragement of work as a result of these programs.
Although much of the discourse surrounding cash transfer programs is that these programs tend to discourage work, the theory is ambiguous. On the one hand, transfer programs can reduce incentives to work: individuals may not work—or may leave visible forms of work—to ensure they receive benefits, or they may simply stop working due to the income effect. On the other hand, these programs can have positive effects on work, helping to reduce credit constraints for the poor and enabling investment in small businesses or allowing them a basic standard of living sufficient to be productive workers. Given that the theory has a certain ambiguity, Banerjee et al. (2017) reanalyze data from seven randomized controlled trials of cash transfer programs in six developing countries to examine the impacts of the programs on labor supply.
Intervention Details
In the study conducted by Banerjee et al. (2017), the authors included in their analysis seven randomized controlled trials of income transfer programs for low-income families in emerging nations. The programs analyzed are: Honduras' Programa de Asignación Familiar II (PRAF II), Morocco's Tayssir, Mexico's Progresa and Programa de Apoyo Alimentario (PAL), Philippines's Pantawid Pamilyang Pilipino Program (PPPP), Indonesia's Program Keluarga Harapan (PKH), and Nicaragua's Red de Protección Social (RPS).
A notable characteristic of all seven programs is that they are implemented by national governments. In terms of program type, most are conditional cash transfer (CCT) programs, in which benefits are conditional on desired social conduct behaviors, such as ensuring that the recipient's children attend school and are vaccinated. The two exceptions were: (1) Mexico's PAL program, in which benefits were not conditional on behaviors, and (2) Morocco's Tayssir program, which has two different treatment types, with conditional and unconditional cash transfer.
Methodology Details
According to the authors, one advantage of harmonizing and reanalyzing databases is that it allows for grouping data and estimating an underlying treatment effect, generating smaller statistical limits than any of the previous studies, making it possible to identify a zero or near-zero effect. Thus, Banerjee et al. (2017) included seven randomized controlled trials of transfer programs in their analysis, identified according to three criteria: (1) being an evaluation of a government transfer program (conditional or unconditional) in a developing country; (2) being available for data for adult men and women in the evaluation; and (3) the randomization having at least 40 clusters. Therefore, the authors obtained data for transfer programs from six countries: Honduras, Indonesia, Morocco, Mexico (two different programs), Nicaragua, and the Philippines.
Results
The results found by the authors show no significant effect of belonging to a transfer program on employment in six of the seven programs. They only found an impact in one program: in Honduras, namely a 3 percentage point decrease in the probability of employment, which is significant at the 10 percent level; however, when analyzing multiple coefficients, this was already expected. The transfer program also shows no effect on hours worked per week: none of the individual coefficients are significant, even in the data from Honduras, where they observed a decrease in employment status.
Even if overall labor force participation hasn't changed, the type of work families participate in could change as a consequence of transfers. In particular, families might choose not to work outside the home due to fears that this form of employment could disqualify them from receiving benefits. However, even taking this point into consideration, no clear systematic pattern emerges, identifying no statistically observable impact on any type of work.
Men and women were analyzed separately, given the differences in labor force participation. The impact of income transfer programs on men's labor supply is only significantly different from zero in one program (Philippines), a positive impact, but overall hours worked do not change significantly. For women, the impact is significantly different from zero in one program (Honduras), a negative impact. However, neither program significantly affects hours worked.
Lessons in Public Policy
Do government cash transfer programs tend to discourage work? Despite claims in the political debate that these programs tend to discourage work and induce increased spending on “temptation goods” such as alcohol and tobacco, Banerjee et al. (2017) reanalyzed data from seven randomized controlled trials of cash transfer programs in six developing countries but found no systematic evidence that cash transfer programs discourage work, for either men or women. Furthermore, the authors cite the study by Evans and Popova (2014), which also found no evidence of this relationship. Therefore, considering the positive effects of transfer programs documented in the literature, Banerjee et al. (2017) suggest that transfers can be an effective policy to help combat poverty and inequality.
References
BANERJEE, Abhijit V. et al. Debunking the stereotype of the lazy welfare recipient: Evidence from cash transfer programs. The World Bank Research Observer, vol. 32, no. 2, p. 155-184, 2017.
