What are the common perceptions of “massive” monetary interventions?
“Big push” interventions are generally proposed to generate significant and sustainable increases in household, community and national income (Banerjee et al. 2020; Kraay and McKenzie 2014). At the household level, two approaches to scaling up the intervention can––in theory––enable households to escape poverty traps and produce persistent reductions in poverty (Ghatak 2015):
When households are in a “poverty scarcity trap”, increasing the intensity (size of cash transfers) of interventions can push households above a poverty line.
Alternatively, when households face “frictional poverty traps” (facing many barriers), increasing the reach (adding complementary interventions to create multi-faceted programs) of interventions can enable households to overcome multiple constraints.
Assessing the increase in intensity and reach of interventions requires measuring the cost-effectiveness of the impact of these approaches (Banerjee et al. 2015). However, evidence regarding longer-term persistence of cost-effectiveness is limited for both approaches.
Filling the evidence gap
In our recent policy research working paper, we compiled 38 estimates of the impacts of temporary cash transfers on household consumption from 14 countries. These estimates came from 17 randomized controlled trials (RCTs) of either (i) unconditional temporary cash transfers (UCTs) or (ii) multifaceted graduation programs with complementary interventions that included temporary unconditional transfers, often called “targeting the ultra-poor”. (TUP). On average, transfers were administered over eight months for unconditional cash transfers and over 16 months for multifaceted graduation programs.
We included these program categories to assess two approaches to increasing the size of cash transfers: increasing their intensity (small cash transfers or large cash transfers) and increasing their scope (cash transfers or multifaceted graduation programs).
The RCTs in our sample all collected information on annual household consumption, cash transfer size, and program cost (in USD at purchasing power parity). To measure cost-effectiveness, we focused on the effects of cash transfers on consumption.
Impacts of unconditional temporary cash transfers
Larger unconditional cash transfers had smaller impacts on consumption per transfer unit both in the short and long term.
The impacts of unconditional cash transfers have been more persistent in developing countries than in richer countries.
Finally, the cumulative impacts of unconditional cash transfers on consumption over the first three years were greater than the size of the transfers, providing clear evidence that unconditional cash transfers are cost-effective.
Impacts of complementary interventions
The complementary interventions increased the impacts on consumption.
In our sample, complementary interventions were relatively expensive to implement. Therefore, the average complementary intervention was 5–43% less cost-effective in increasing consumption than the average unconditional cash transfer over the average time horizon assessed (1.5 years for UCT and 2.6 years for TUP ).
Figure 1 shows that the sign reversal of the relative effect of TUP on consumption per unit transfer and per unit cost is due to the much higher implementation costs of TUP, and that the differences in the costs of implementation between TUP programs are as important as the differences. transfer fees between UCT and TUP.
However, we also find evidence that the average impacts of TUP complementary interventions mask important variations across contexts. Specifically, we find evidence of variation in the cost-effectiveness of complementary interventions on increasing household consumption.
Finally, the relative cost-effectiveness of complementary interventions increased over time––impacts surpassed those of unconditional cash transfers after 3.4 to 7.7 years.
However, only four of the 20 supplementary intervention estimates in our sample were more than three years old since the last transfer, highlighting the need for longer-term estimates.
Figure 1: Estimates of the impacts of UCT and TUP interventions on consumption per unit of transfer or per unit of cost
Our results highlight that context-specific estimates are important for the long-term impacts of complementary interventions to inform policy. It should be noted that beyond cost-effectiveness, there are rationales for increasing the size of the intervention to consider. For example, increasing the size of transfers or providing multi-faceted programs to the poorest households can be powerful tools for poverty reduction (despite varying cost-effectiveness).
However, our results also call into question the need for “massive” interventions to reduce poverty, in particular:
Small temporary cash transfers (total value of transfers less than USD 1,000 PPP/household) provide a solid benchmark for scalable and cost-effective poverty reduction in various contexts.
The presence of poverty traps alone does not justify increasing the size of interventions.
On the contrary, the distribution of poverty lines conditional on targeting is crucial.
This meta-analysis was conducted during the preparation stages of the cash and gender impact assessment component and the climate and resilience impact assessment component of the World Food Programme. It is based on data compiled to complete the Cash Transfer and Gender Impact Assessment Window Pre-Analysis Plan.
Read the working document, including the full results and a detailed discussion of the results.
* This blog is co-published here with the World Food Program Evaluation Office.