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cash transfers

Cash as a response to humanitarian distress

Suvojit Chattopadhyay's picture

Men thrashing grain in IndiaIn the context of the subsidies regime in India, there is an ongoing debate on the suitability of cash transfers. With the much talked about JAM trinity – the Jan Dhan zero-balance bank accounts, Aadhar and mobile phones, it certainly appears that the state-sponsored welfare system is set to see a significant shift. While this shift may well fall short of being transformative, we could still expect an improvement in how benefits are delivered with reduced leakages to recipients. The use of the JAM model to extend the welfare net and to improve its efficiency implies a decisive move towards cash transfers, and therefore, one may be closer to settling the debate, at least in terms of favoured government policy.

But the argument in favour of cash is not new. I recently came across a 1986 United Nations University WIDER paper by Amartya Sen where he elegantly outlines five arguments in favour of direct distribution of cash in times of food crises. In this paper Food, Economics and Entitlements, Sen tackles this question in the context of a famine. First, Sen demonstrates how even in contexts where aggregate food output is plentiful, the ability of the poor to acquire this food is a whole different matter. Localised food shortages and famine-like situations can arise due to various reasons – at times when the prices of staples rise sharply, or when the prices of products the poor sell fall sharply. However, this isn’t obvious to policymakers as long as they view food sufficiency through the lens of per-capita food production alone.

When famines manifest themselves, there could be multiple policy response options. Sen talks of direct food distribution as the favoured method in those times. Three decades down the line, food relief continues to be popular in times of distress, even as direct cash transfers (as described above) are gaining ground as a favoured instrument of social welfare policy. Policy responses in these times is meant to enhance the ability of those affected, to ‘acquire’ more food. Both market-based solutions that begin with greater availability of cash, and direct distribution are potential paths to this end.
 

Weekly wire: The global forum

Roxanne Bauer's picture

World of NewsThese are some of the views and reports relevant to our readers that caught our attention this week.

Worth Every Cent
Foreign Affairs
In a Foreign Affairs article last year, we wrote what we hoped would be a provocative argument: “Cash grants to the poor are as good as or better than many traditional forms of aid when it comes to reducing poverty.” Cash grants are cheaper to administer and effective at giving recipients what they want, rather than what experts think they need. That argument seems less radical by the day. Experimental impact evaluations continue to show strong results for cash grants large or small. In August, David McKenzie of the World Bank reported results from a study of grants of $50,000 on average to entrepreneurs in Nigeria that showed large positive impacts on business creation, survival, profits, sales, and employment, including an increase of more than 20 percent in the likelihood of a firm having more than ten employees.

No, Deaton’s Nobel prize win isn’t a victory for aid sceptics
Bond
A lot of fuss has been made this week about the latest winner of the Nobel prize in economics, British-born economist Angus Deaton, and his apparent aversion to foreign aid. Predictably, much of the press has taken his victory as a vindication of their suspicions on aid. It’s worth getting a few things straight though. Deaton did not win the Nobel prize for his criticism of aid. He was awarded the prize for his analysis of inequality and creation of better tools with which to analyse living standards amongst the poorest people in the world. Deaton is, in fact, more of a critic than an opponent of aid. In the same way that a film critic doesn’t hate all films (although it sometimes seems they do), Deaton doesn’t hate all aid.

The things we do: Self-command takes practice

Roxanne Bauer's picture

Also available in: العربية

Following prolonged conflict, it is often difficult to reestablish security and reduce crime and violence, especially among poor young men. In Liberia, development experts have been researching the most effective ways to support high-risk individuals, and they may have found an effective approach combining therapy with cash.

Cognitive Behavior Therapy and Cash Transfers on High-Risk Young Men in LiberiaOne of the most pressing concerns in post-conflict settings is how to help individuals transition back into a peaceful life. After a conflict has subsided, small arms are usually very common, local and national economies have been destroyed, and the emotional stress of the violence begins to take on new forms. Former soldiers, in particular, have trouble with the transition as they struggle with the pain and horror of what they experienced, and many do not remember how to participate in community life anymore.  In response, the international development community often tries to “enable” these men by creating jobs for them. The theory is that if people are busy working they will not have the time or the inclination to commit crime.
 
However, simply providing jobs is rarely enough. The Network for Empowerment & Progressive Initiative (NEPI), an organization operating in Monrovia, Liberia, challenges this paradigm and seeks to support men formerly engaged in the country’s two civil wars by rehabilitating them through therapy.  
 
Klubosumo Johnson Borh, the founder of NEPI, was as a Liberian teenager when he was recruited for Charles Taylor‘s infamously brutal rebel army. Borh was made a commander and oversaw soldiers who were even younger than he was. By the end of the conflict, which lasted from 1989 through 2003, nearly 10% of the population had been killed, and thousands of child soldiers were now grown men.  Many of these men had trouble shaking the violent behaviors they had learned in war so Borh helped start NEPI in an effort to reform these and other troubled men.

Philippines: One Year after Typhoon Haiyan: Social Protection Reduces Vulnerabilities to Disaster and Climate Risks

Mohamad Al-Arief's picture
  • Countries can respond to natural disasters better and assist victims faster if  social protection systems are in place
  • Social protection systems have a role  in addressing the human side of disaster and climate risks.
  • Global collaboration on mitigating disaster and climate risk through social protection systems  facilitates solutions
Social protection specialists, disaster risk managers, risk finance practitioners and climate change experts at the World Bank Group sat down together recently to discuss the role of social protection systems in addressing the human side of disaster and climate risks.
 
Together with government counterparts and donor partners, they extracted lessons and came out with a compelling message: countries can respond to natural disasters better and assist victims faster if robust social protection systems are in place.

Confusing a treatment for a cure

Berk Ozler's picture
A treatment is an instance of treating someone, say, medically. A cure ends a problem. Sometimes, the treatment is a cure. Other times, it just keeps the problem under control without curing it: if you remove the treatment, the problem comes back…
 

Do the Poor Waste Transfers on Booze and Cigarettes? No

David Evans's picture
While discussing a cash transfer program, a senior government official in Nicaragua spoke for many when she worried that “husbands were waiting for wives to return in order to take the money and spend it on alcohol” [Moore 2009]. This concern around cash transfer programs comes up again and again. For at least some of the poor, some will say, “Isn’t that how they became poor in the first place?”

Six Strategies to Fight Corruption

Augusto Lopez-Claros's picture

Having looked at some of the ways in which corruption damages the social and institutional fabric of a country, we now turn to reform options open to governments to reduce corruption and mitigate its effects. Rose-Ackerman (1998) recommends a two-pronged strategy aimed at increasing the benefits of being honest and the costs of being corrupt, a sensible combination of reward and punishment as the driving force of reforms. This is a vast subject. We discuss below six complementary approaches.

Africa Impact Evaluation Podcast: Community-Based Conditional Cash Transfers Make a Big Difference in Tanzania

David Evans's picture


Photo credit: Katrina Kosec.

Can a cash transfer program that relies heavily on communities to target beneficiaries, deliver payments, and monitor conditions, improve outcomes for the poor in the same way that more centrally-run conditional cash transfer programs (CCTs) have elsewhere?

Why are Direct Dividend Payments so Difficult in MENA?

Kevin Carey's picture

As a wave of newly resource-rich countries, especially in sub-Saharan Africa, looks to the best means of managing resource wealth, one compelling recommendation has come to the fore: to distribute at least some portion of resource revenues to the public through direct dividend payments (DDPs). The case is laid out in papers published at the Center for Global Development by Todd Moss and the World Bank’s Shanta Devarajan and Marcelo Giugale. The DDP proposal has several foundations. Payment technology has increased the feasibility of large-scale transfers, as Alan Gelb and Caroline Decker explain. There are already cases of developing countries scaling up identity card systems associated with cash transfers quite quickly. As for rationale, given the poor track record of public expenditure efficiency, especially in resource-rich countries, it seems clear that general welfare could be targeted more effectively through DDPs, and without any of the distortionary effects or distributional flaws of price subsidies. Finally, from a political economy perspective, DDPs coupled with taxation could restore the accountability of a government to its citizens, which is otherwise weakened by its ability to draw on revenues directly from the source.
 


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