cash transfers, risk management, and cognitive development in early childhood
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Cash Transfers, Risk Management, and Cognitive Development in Early Childhood. Based on joint work with collaborators from the World Bank (Patrick Premand and Renos Vakis), the Inter American Development Bank (Norbert Schady) and partners in Nicaragua (CIERUNIC and CIASES). Karen Macours - PowerPoint PPT PresentationTRANSCRIPT
Cash Transfers, Risk Management, and Cognitive
Development in Early Childhood
Based on joint work with collaborators from the World Bank (Patrick Premand and Renos Vakis), the Inter American Development Bank
(Norbert Schady) and partners in Nicaragua (CIERUNIC and CIASES)
Karen Macours Paris School of Economics
Motivation (1) Households in developing countries are often highly
exposed to risk
Growing sense that exposure to risk of agricultural households might become even more pressing
Climate change leading to higher weather variability Climate change leading to changes in weather patterns Globalization and market integration leading to more fluctuations in
food prices …
Adaption, coping and risk management abilities are often limited for poor agricultural households
Lack of formal insurance, in combination with many other market imperfections
But also possibly: low aspirations, lack of information, status quo bias,…
Motivation (2) Households use a variety of strategies to deal with risk
Income diversification Asset accumulation Formal and informal insurance …
But large welfare cost of risk and shocks remain
Policy ? Social safety nets Insurance schemes Interventions that enhance household risk-management
(other than insurance…)?
“Atención a Crisis” Innovative pilot in Nicaragua specifically designed
to explore the complementarities between a safety net and productive interventions to improve risk management in the medium-term
Implemented after major drought, and in environment with overall high exposure to drought shocks
Program objectives: Safety Net in the short term: Reduce the negative impact of
aggregate shocks that deplete the accumulation of human and physical capital investments, and reduce the need to use adverse ex-post mechanisms for coping with shocks
Foment upward mobility and poverty reduction through the accumulation of productive assets in the long term: Improve the asset base of beneficiary households and the capacity to diversify income and reduce poverty through strengthening risk management strategies ex-ante in a manner that is sustainable over time
This presentation Findings of a randomized impact evaluation
Asset creation protect households against negative impact of shocks through better risk management and income diversification
Social safety net helps protect cognitive and socio-emotional development in early childhood
Sustainability of impacts after the end of the program =>Role of behavioral changes and aspirations
Outline Setting Pilot program Are households better protected against
shocks two years after program ended? Role of aspirations
Are there sustainable improvements in early childhood development? Role of behavioral changes
Conclusions
“Risky” Setting Nicaragua: one of the poorest countries in Latin
America Many risks: natural disasters, weather, economic,… Despite frequency of droughts, strong dependence on self-
employment agriculture (beans and corn), and very little diversification into non-agricultural activities
Drought shocks have a negative impact Total consumption decreases upto 50%, food consumption
upto 27% 60% of households report a drought shock in last year
Households perceptions of increased weather risk (rainfall data confirm significant changes in rainfall patterns)
Households consider agricultural activities riskier than other type of economic activities
Some details on the “Atención a Crisis” pilot program Program of the ministry of the family (MIFAMILIA) 6 municipalities in rural Nicaragua with high levels of
extreme poverty and frequent droughts 3000 poor and vulnerable households
Combine conditional cash transfers with interventions targeted at increasing the productive capacity of poor households
1000 hh: CCT 1000 hh: CCT + vocational training 1000 hh: CCT + productive investment grant
November 2005 - December 2006 Women primary beneficiaries of program Heavy social marketing and design facilitated group
dynamics
Design/Timing of the Impact Evaluation
Randomized selection in two steps Random Control (50) and Treatment communities (56) Within treatment communities: Lottery to select families in
each of the 3 packages
Baseline in 2005 No baseline differences between treated and control
households, nor between different treatment groups
Follow up survey – July-August 2006 9 months after the program began
Program ends December 2006
Second follow-up survey in 2008-2009 ~ 2 years after end program
Beneficiaries of the training package
Beneficiaries of the productive investment package
Questions on productive component
Are beneficiaries better protected against shocks 2 years after the end of the program?
What are the underlying mechanisms? Role of asset creation: Differences between packages Information on income diversification Attitudes towards risk and risk-management
Role of social interactions in changing aspirations?
Relationship between shock intensity and key outcomes in T and C
Relationship between shock intensity and key outcomes in T and C
Main findings on risk management Beneficiaries are better protected against negative
impact of agricultural shock On total consumption and food consumption Protection highest for productive transfers (T3)
2 years after the end of the intervention, the impact of productive transfers significantly positive, and significantly larger than other interventions in presence of shocks
Mechanisms? Program induced income diversification
More livestock activities/income More nonagricultural activities/income
Program leads to changes in attitudes towards nonagricultural and agricultural activities
Role of changing aspirations?
“Before the program, I just thought about working in
order to eat from day to day. Now I think about
working in order to move forward through my
business. Through experiences, one learns and
opens up towards the future. By talking to others,
one understands and learns.”
Beneficiary of the productive investment package
Change in aspirations through interactions with leaders Program design facilitated multiplier effects by
building in mechanisms to enhance social interactions
Positive role of leaders
Positive experiences of, and interactions with, nearby leaders can help open people’s aspiration window
Note that this does not imply targeting to leaders: multiplier effects are the largest when both leaders and other beneficiaries received the largest package
Social interactions and changing aspirations might be important for sustainability of program impacts
Returning to the social safety net Were there sustainable improvements in
early childhood development? Motivation for focus on ECD
Little evidence on the impact of cash transfers on cognitive and emotional development in early childhood
Cognitive development in early childhood is an important predictor of success throughout life
Literature on how nutritional supplements and early childhood stimulation programs affect early childhood development
Much less is known about programs that affect investments of parents directly
Children have very large delays in cognitive development
Main results1. Significant program effects on early childhood development,
and particularly so on cognitive and social-emotional skills
1. Effects persist 2 years after the program ended
1. Households who got the productive investment package still have significantly higher consumption than households with basic package, 2 years after the program ended
1. Yet, no significant differences in early childhood development outcomes between children in households who randomly got the larger transfers versus basic treatment
=> Suggest that something other than (or in addition to) the cash explains the treatment effects on child development
Changes in household investment patterns
Behavioral changes contribute to sustainability
Changes in the importance and composition of food expenditures Upward shift in the Food Engel curve Decrease in food share devoted to staples Increases in food share devoted to animal proteins, and fruits &
vegetables
Increase in stimulation: Increase in proportion of children at a given expenditure level
who have access to books, pen & paper Significant increase in number of hours read to
Improvements in measures of investment in child health
Remarkably: these changes are smaller but still significant in 2008, even for the basic package
Behavioral changes: At any level of expenditures, treated and control communities spend resources differently
Conclusions Productive safety nets can help households to
manage risk while protecting children’s development (CCT plus) On the short-term: through social safety net On the longer-term:
Through facilitating income diversification through asset creation
Through changes in aspirations Through behavioral changes
Understanding better which design features contribute to such changes is key
Thank you!