Lecture 3: Fighting Poverty with Social Programmes
Spring 2026
Questions addressed today
◦ What type of interventions can lift people out of poverty?
◦ How can interventions be targeted?
◦ What are the implications of different design features?
− Food vs cash.
− Conditionality vs unconditional.
◦ How are non-participants affected?
Readings for today
◦ Required:
− Chapters 14 in Development Economics: Theory and Practice.
− Baird, S., McIntosh, C., & Özler, B. (2011). Cash or condition? Evidence
from a cash transfer experiment. The Quarterly journal of economics, 126(4),
1709-1753.
◦ Suggested:
− VoxDevTalk Interview with Dennis Egger: “Cash transfers and the wider
economy: Evidence from Kenya”
Paths out of Poverty
1 Enhanced capacity to earn income.
− Increased access to capital (natural, physical, human, financial and social).
− Improved context (growth, access to market, institutions, public goods).
− Change in behaviour addressing suboptimal allocations.
2 Targeted Transfers.
3 Prevent the vulnerable non-poor from falling into poverty.
Social Programmes: Safety Nets vs Cargo Nets
◦ Reduce exposure to shocks
◦ Help manage risk (ex ante)
◦ Cope with risk (ex post)
◦ Improve asset position
◦ Improve context
◦ Permanent transfers
Targeting Social Programmes
◦ Targeting required for programmes to reach intended recipients.
◦ We observe an approximate measure (ŷ ) of true income/consumption (y ).
◦ Two types of errors: excluding the truly poor (type I) and including the non-poor
(type II).
Example of Inclusion, Exclusion and Benefit Trade-off
Different Methods to Target the Poor
1 Target Individuals
− Means Test
− Proxy Means Test
− Community Based Targeting
2 Target Groups
− Geographical
− Demographic
3 Self-targeting
− Transaction costs
− Inferior goods
− Work requirements
Comparing Methods
◦ Coady et al. (2004) examined 122 targeted anti-poverty interventions in 48
countries.
X
. X is the share of program benefits that go to the poorest 40%.
◦ Performance= 40
Targeted vs Un-targeted
◦ Universal Basic Income - fixed transfer given to everyone. ⇒ No exclusion error.
◦ Potential benefits of UBI:
− Low administrative costs (but limited compared to transfer sizes)
− Ease of implementation in low capacity and corrupt environments (but
transparency can be achieved through other means).
− Political support may be much higher for higher inclusion errors ⇒ budget
not fixed.
− Horizontal equity (everyone should be treated the same).
− Less distortion (e.g. work less to receive transfer).
Program Design
◦ Great variety of social assistance programmes.
− Public works, weather insurance, input subsidies, food aid, CCT, CDD, etc.
◦ We will look specifically at:
− Food vs. cash.
− Conditional vs. unconditional
Food vs Cash?
◦ Is it better to transfer food or cash?
◦ Many programs social assistance programs transfer food (e.g. RASKIN in
Indonesia).
◦ Recipients can (try to) re-optimize and reallocate their own spending in response.
◦ Transfers can be:
− Infra-marginal (if the recipient wish to spend more on the good than the
transfer received).
− Extra-marginal (if the the recipient wish to spend less on the good than the
transfer received).
◦ Fungibility with in-kind transfers typically lead to incomplete additionality.
Fungibility (infra-marginal)
Fungibility (extra-marginal)
Food vs Cash?
◦ From utility perspective: cash transfer generally better than food transfers.
◦ Other considerations?
− Cost of distribution / leakage. This has gone down with mobile money.
− Market effects. More on this later today.
◦ How should cash transfer programs be set up?
Conditional Cash Transfers (CCT)
◦ CCT has now been implemented in a large number of countries (e.g. Progresa in
Mexico and Bolsa Familia in Brazil).
◦ Two main objectives:
− Reduce consumption poverty (cash transfer).
− Promote human capital accumulation (conditionality).
CCT Expansion
CCT Expansion
CCT vs. UCT?
◦ Should cash transfers be conditional or not?
− Is conditionality ethical?
− Administrative costs?
CCT vs. UCT?
◦ Should cash transfers be conditional or not?
− Is conditionality ethical?
− Administrative costs?
◦ Reasons for conditionality:
− Parents may not be fully informed.
− Parents may not decide optimally for their children because of large discount
rates.
− Parents may under-invest because of the positive externalities of education.
CCT vs. UCT?
Example: Baird et al (2011)
◦ Investigate the differential effect of UCT and CCT.
◦ Study the impact on school attendance, human capital and teen marriage &
pregnancy for adolescent girls in Malawi.
− Improved test scores linked to higher wages later in life. Delayed fertility and
marriage is linked to better health for mother and child.
◦ Earlier work suggest: School Attendance ⇑ ⇒ Marriage & Pregnancy ⇓ (Osili and
Long 2008; Ferre 2009; Duflo, Dupas, and Kremer 2011; Ozier 2011)
◦ RCT on 176 enumeration areas:
− CCT
− CT
− Control
Baird et al (2011): balance test
Baird et al (2011): School Enrollment
Baird et al (2011): Test Scores
Baird et al (2011): Marriage and Pregnancy
Baird et al (2011): Making Sense of Findings
◦ How do we reconcile the fact that the CCT arm led to schooling increases with
the fact that the sharp decreases in marriage and pregnancy are found only among
the UCTs?
General Equilibrium Effects
◦ Lot of evidence show that CT have large effects on recipients.
− Consumption, earnings, assets, food security, child growth and schooling,
self-reported health, female empowerment, and psychological wellbeing
(Haushofer and Shapiro, 2016; Baird, McIntosh, and Ozler, 2011; Bastagli et
al., 2016)
◦ But what about non-recipients. How would we expect them to be affected?
− Positive?
− Negative?
General Equilibrium Effects
◦ Egger et al (2022) studied this in Kenya. GiveDirectly provided one-time cash
transfers of about USD 1,000 to over 10,500 poor households (15% of local GDP).
− Impact on recipients: in line with earlier findings. ⇑ consumption (13%) &
durable assets, education expenditure.
− Impact on enterprises: ⇑ revenue & wages, 0 on profits.
− Impact on non-recipients: ⇑ consumption (13%).
− Economically small impact on prices.
◦ Local fiscal multiplier of 2.5.
◦ What methodological insights do we get from this analysis?
General Equilibrium Effects
◦ How do GE effects differ depending on transfer type?
◦ Cunha et al. (2019) study this in Mexico.
Next Lecture
◦ Discuss the role of education in development.
◦ Readings:
− The part of Chapter 17 covering Education in “Development Economics:
Theory and Practice”.
− Duflo (2001): ”Schooling and Labor Market Consequences of School
Construction in Indonesia: Evidence from an Unusual Policy Experiment”