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Impact Evaluation and Political Economy: What Does the “Conditional” in “Conditional Cash Transfers” Accomplish?
January 12, 2012
Some economists, with their recent fad for “evaluation”, have managed to get themselves deeply confused about what the “conditional” in “conditional cash transfer” (CCT) is really about. They often interpret the “effectiveness” of CCTs relative to the action/behavior/outcome that was conditioned on—for example, the impact of schooling-conditioned transfers on enrollment rates.
But the key question is whether the value of the conditionality in CCT lies in the political symbolism provided by the condition that supports the transfer, or whether the condition has some additional benefits (or what mix of the two).
A policy entrepreneur who wants well-targeted cash transfers will encounter two obstacles. One is meddling politicians who want to manipulate cash transfers, with motives based in clientelism, patrimonialism, or partisan electoral politics. A second is “right wing” political forces who believe that transfers to “the poor” are morally objectionable as they create perverse incentives by reducing the need for work, financing bad habits (drink, tobacco) or otherwise go to the “undeserving” poor.
The “conditionality” of cash transfers is a brilliant symbolic political ploy to neutralize both meddling politicians and right-wing objections. The recipients of CCTs are “deserving” poor because they are (a) chosen by “scientific” criteria like a proxy means test (which therefore cannot be meddled with politically) and (b) the cash transfer isn’t just a “handout” but rather the poor have to do something socially valuable to be deserving poor, they have to “invest in human capital.”
The role of conditionality in making a well-targeted cash transfer politically feasible might be completely independent of whether the conditionality itself improves recipient household welfare. In fact, conditionality could be valuable from a social welfare function view even if the conditional transfer proved to be less welfare enhancing than a non-conditional transfer. This would be the case whenever making transfers conditional raises the amount and improves the targeting of the politically feasible transfer sufficiently above the largest politically feasible unconditional transfer. One conditional dollar that is politically feasible to deliver might do more social good than an infinite number of unconditional dollars that are politically infeasible to deliver.
In the logic of politically motivated conditions, a policy entrepreneur who wants to raise the well-being of the poor would seek to maximize the symbolic value of the conditioned behavior while minimizing the welfare loss to households of actually engaging in that behavior. The idea would be to pick a behavior with potent symbolic value that nearly all households in the targeted category are doing anyway. This means the welfare loss from the condition is low, since it is already the unconditioned maximizing choice of most households. Notice that in this political logic if an activity with potent symbolism could be found, the optimal “conditioning” would be infra-marginal for nearly all transfer recipients—that is, by design the conditionality would not change most recipients’ behavior.
Of course, another way to think about CCTs is that imposing conditionality has big welfare effects over and above the transfer itself. This is an odd way for economists to think, as the value of the conditionality then depends on changing people’s behavior with a binding condition. This is odd position for economists who are usually an intellectual bastion in favor of choice and against the symbolic appeal of paternalism to those who condescend to the poor. A binding condition only increases a non-paternalistic social welfare function if households are (for some reason) not welfare maximizing already or if there are external effects. Of course many sophisticated arguments could be made about spillovers or information failures or externalities but there has never been any evidence for the magnitude of these effects. Moreover, the condition is often to attend schooling that is already massively subsidized and provided (near) free of charge so that the argument would have to be the externalities/market failures are not sufficiently offset by the existing subsidy—an empirical standard that has never been documented anywhere.
Notice that these two logics create almost directly opposing views on the ex ante design and the ex post evaluation of impact. The political logic suggests creating conditions that are easy to meet but symbolically important so that the “impact” should be small and the “impact” of the conditionality could be interpreted as the welfare loss needed to politically sustain the program. The “economic” logic suggests creating conditions that require behavior change and are not infra-marginal and the “impact” of the conditionality is a measure of the welfare gains from forcing poor people to change their behavior.
The genius of the CCTs in Mexico and in Brazil was not about how to get kids in school but rather about how to use the fact that almost all kids already were in school to generate welfare loss minimizing but nevertheless politically powerful symbolism to expand cash transfers. Many of these transfers were conditioned on the enrollment of children in age groups with near-universal enrollment. (In Brazil in 2001, for example, enrollment at ages 9–12 exceeded 95%.) As a strategy for getting kids into school, as a recent J-PAL note attests, this makes CCTs highly cost-ineffective. Does this make the transfers a silly giveaway or a political master stroke—maximizing the political symbolic value of a cash transfer while minimizing the burden on the recipients of conditions? Ask yourself: What did the designers think?
Miguel Székely, one of the designers of PROGRESA, writes, “The real underlying objective of external donors/investors in some circumstances might not be generating impact, but rather making the statement that they are supporting a particular cause. In such cases, the objective might well be a noble and legitimate one, and the measure of success will be the flow or resources itself, rather than its final impact, but neither the donor/investor nor the executor might have incentives to invest in evaluation.”
In other words, one common narrative—that the scaling up of CCTs is a good example of evidence based policy making because the use of randomization in the design of PROGRESA provided solid evidence that it was an effective program and hence other countries adopted a CCT because of this solid evidence—has it almost exactly backwards. The impact evaluation proved that PROGRESA was cost ineffective if it was considered as a mechanism to increase schooling. Everyone involved in the design knew this. They were not imposing the conditionality to get the behavior conditioned upon, but to get the transfer itself.
What PROGRESA proved that was convincing was about the political effectiveness of conditions to the implementation and supportof cash transfers. Adding conditions to cash transfers allowed a well-designed cash transfer to have political traction against opponents. But this was learned from the experience itself—which is why the Brazilian experience added to the persuasive power of the evidence that adding the conditionality to cash transfers is good politics even though it had no experiment attached.
Ironically, what was really learned from the experience of PROGRESA is that having a rigorous experiment attached to your program can be great politics, as it makes the program seem technocratic and scientific and cool and adds to the symbolic value by demonstrating compliance in attendance (even where that was not an increase versus a counter-factual). This increases your ability to resist partisan political meddling in design and implementation—even if you don’t learn anything particularly special from the experiment.
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January 12th, 2012 at 3:09 pm
Another reason Mexico’s Progresa was clever politics: policymakers used the program as a way to eliminate the untargeted tortilla subsidy. Unfortunately, in recent years, both the coverage of Oportunidades (Progresa II) and the size of non-Oportunidades untargeted subsidies have been growing rapidly, likely reducing the efficiency of public spending on poverty reduction.
January 12th, 2012 at 3:18 pm
Apart from my blog today responding to Lant’s other piece on CCTs in Development Impact (http://blogs.worldbank.org/imp.....-pritchett), I happen to have a few comments on this post as well.
1. I don’t know what the designers of PROGRESA thought at the outset, but I know what they said later. This is Santiago Levy (one of the architects of PROGRESA) on Kojo Nnamdi show last year (http://thekojonnamdishow.org/s.....transcript):
LEVY: “…the experience of Latin American countries with the equivalent mechanisms like Food Stamps or trying to transfer income through the fiscal system, you know, the earned income tax credit, was not very promising.
The fundamental point here is that if you give people food stamps, it’s another way of giving them money, but nothing else happens. And then, tomorrow you have to do the same and the day after tomorrow you have to do the same. Whereas, if you give them money, but you say, look, you have to invest in yourself. You have to think about the future and we don’t want your kids to be in the same situation that you are today, you raise your consumption today, but at the same time, you do something to change conditions in the future. And that has to do with what economists like to call the human capital of people.
You know, their education, their health, their ability to participate in the labor market, to have skills, which is what really at the end of the day is going to be what changes matters. The real test of these programs is whether eventually you will not need them. If you have a program like this that lasts 30 years, you’re failing because you’re not really changing the underlying conditions.”
This does not sound like the conditionality was built in to minimize welfare loss while maximizing transfers to poor households. Perhaps, this is part of the political genius Lant is referring to, but neither of us have any way to prove it…
2. The condition in PROGRESA (or other CCT programs in the region) is not enrollment but regular attendance. Even if more than 90% of the kids were in school, we don’t know how well they were attending school or the effort they were putting in. The simplistic discussion of the enrollment condition as a political tool ignores any intensive margin effects. In Malawi, conditional on enrollment, attendance was also higher in the CCT group compared with the controls.
3. CCTs are not just in Latin America any longer. They are up and coming in Sub-Saharan Africa. In that context, there is often a tension between the “handouts/dependence” argument, and “unnecessary/immoral/costly” conditions that are argued to be too much for the administrative capacity of many of the governments contemplating them. There, it is not crystal clear what the political master stroke is and it can reasonably bet argued that a proper economic analysis of CCTs (compared to a proper counterfactual of feasible UCTs) is needed.
4. If, in the ideal condition using the political logic, everything is infra-marginal, then does this mean that the programs for secondary and tertiary school under “Oportunidades” should not be run? Enrollment rates at these levels are way lower than 100%. If not, then we still need to know whether imposing conditions is welfare improving or not (taking into account the argument about the endogenous size of the funds available for the proposed CT program).
Berk.
January 13th, 2012 at 10:04 am
Interesting to see in this discussion the old school rational economic man perspective stacked up against the new behavioral school view that people need nudges because they aren’t rational.
With politics trumping both…
January 19th, 2012 at 1:45 am
I am not sure why the evaluation of CCTs needs to be so complex. There are two impacts: firstly, the impact due to conditions (more go to school?, etc.); secondly, the impact of the artificial increase in household revenue over a period of time. The second impact is multi-faceted and needs to be measured against control groups (e.g. to answer “right wing” concerns noted above). What, for example, was the marginal change in consumption and investment expenditures? Were CCT households better able to cope with shocks? Given transfers over, say, five years, were other sustained revenue sources generated (e.g. remittances, new crops, open a shop, etc.)? Here, post-evaluations become important. The core research question is: “Do artificial injections of increased household income for some years lead to sustained positive household welfare increases?” – meeting CCT conditions are one aspect in answering that question.
January 20th, 2012 at 4:42 am
Thank you for a thought provoking post. And some interesting comments. It made me think, however; ‘How many micro’s- are there in a macro-; How many psychologies in a social-psychology; who many ‘anthropomorphs’ in a ‘sociol’?’
CCT’s were very popular at the World Bank a few years ago. I remember someone, now very prominent there apparently, coming into my office and saying ‘Grant, the impact of Brazil CCTs has been amazing this is a “best practice” we can share everywhere’. Being a former consultant and not a natural bureaucrat. I felt obliged to ask the person concerned to tell me a little more. Having listened (and summarizing a bit);
‘So; you have some fast growing middle income economies with plenty of issues but more or less happy and growing middle classes. Employment and democracy coming along nicely – countries perhaps climbing Douglass North’s closed/open access society scale (the war-lord/dictator types are gradually being replaced by professional politicians). Most ordinary folks (now promoted to ‘voters’) still feel close enough to the past to be happy to be hoodwinked a bit; ‘there but for the grace of God etc.’. And you think we can sell this as “best practice” in lets take an easy example to start with; a resource-rich, democracy-poor, non-employment, low-income tax, barely industrialized, low-(non-resource extraction) growth place with lots of guns and who – lets be honest with ourselves – probably don’t trust us or our motives?’.
I think I must have bored them because the conversation ended with a polite ‘I am sure we can “show the positive impact”. And an implicit, we can take care of the rest.
I am sure the person concerned felt they were doing the right thing for ‘global poor people’ and ‘inclusion’, and that they were giving a clear and strong signal of their concern for and fighting-spirit against ‘power asymmetries’ in the world. But, in my more humble experience, development paths are very locally specific and not always straight or linear multiplication of ‘(global) best practice’. Development is in fact almost always non-linear – the old ‘external validity’ problem for those with a passion for ‘evidence-based’ policies (and politics).
Somehow in our debates and discussion on good even the best ‘science of development’ we have lost sight of the art. ‘Political-economy’ analysis was never an exact science – history may be as useful as anything. Maybe improvements are possible, but I think less important than any discipline or perspective is an appreciation of the nature of ‘(complex) systems’; of the existence of (cascading layers of) feed-back loops between the micro- and the macro-; between the psychology and the social-psychology.
Imagining the multiple equilibriums of most ‘(complex) systems’ makes it easier to think of the risk/likelihood of what might seem improbably outcomes on both the up (how to really strategically invest in a development dynamic), but alas also the down side:
http://blogs.cgdev.org/globalh.....mment-2545
(see comments)
Perhaps we can add a new line before the end of social science papers in development. Obviously, first, ‘this subject needs more research’, but also, ‘the internal validity of these results does not guarantee their external validity’. CYA. Then the politicians will still get their way of course but you can maintain some semblance of dignity and intellectual integrity. Potentially useful in the longer term. Maybe the Macro-economic Commission on Health is starting to wish they had done this? But there is maybe a consolation, they say, ‘all political carriers end in failure’; whereas fighting to understand is its own reward.
And this was a thought provoking piece. Thank you.