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With a Little Help from my Friends: the Multiplier Effect of Public Subsidies through Private Support

Author

Listed:
  • Sandra García
  • Jorge Cuartas
Abstract
Conditional cash transfer (CCT) programs have become an important component of social assistance in developing countries. CCTs, as well as other cash subsidies, have been criticized for allegedly crowding out private transfers. Whether social programs crowd out private transfers is an important question with worrisome implications, as private support represents an important fraction of households’ income and works as a risk sharing mechanism in developing countries. Furthermore, empirical evidence on the effect of public transfers on private transfers is mixed. This paper contributes to the literature by using a unique dataset from the quasi-experimental evaluation of a CCT in Colombia and an empirical strategy that allows us to correct for pre-existing differences between treated and control groups. Our results suggest that the public transfer did not crowd out private transfers, neither in the short-run nor in the middle-run. Instead, it increased the probability of receiving support in cash, in kind, and in non-paid labor from different private sources by approximately 10 percentage points. Moreover, we find that the monetary value of private transfers increased by 20% for treated households, suggesting that the public transfer had a multiplier effect on household income through private support. Information about the program design suggests that some of its features, such as community meetings and delivery of information, may be important in explaining these effects. The findings give insights on the way social programs could have a twofold positive effect on households’ well-being, both through their direct impacts and by affecting inter-household dynamics. ****** Los programas de Transferencias Monetarias Condicionadas (TMC) se han convertido en un componente muy importante de la política social en países en desarrollo. Los TMC, al igual que otros subsidios monetarios, han sido criticados por supuestamente desplazar transferencias privadas. Si programas sociales de este estilo desplazan transferencias privadas es una cuestión importante con implicaciones preocupantes, en la medida que el apoyo privado representa una fracción importante del ingreso de los hogares y funciona como un mecanismo de diversificación de riesgo en países en desarrollo. Más aún, la evidencia empírica del efecto de las transferencias públicas en las transferencias privadas es mixta. Este documento contribuye a la literatura utilizando una base de datos única de la evaluación cuasiexperimental de una TMC en Colombia y una estrategia empírica que nos permite corregir diferencias preexistentes entre los individuos del grupo de tratamiento y control. Nuestros resultados sugieren que la transferencia pública no desplazó las transferencias privadas, ni en el corto plazo ni en el mediano plazo. Por el contrario, esta incrementó la probabilidad de recibir apoyo en dinero, en especie, y en trabajo no remunerado de diferentes fuentes privadas en aproximadamente 10 puntos porcentuales. Adicionalmente, encontramos que el valor monetario de las transferencias privadas aumentó en 20 % para los hogares tratados, sugiriendo que la transferencia pública tuvo un efecto multiplicativo en el ingreso de los hogares mediante apoyo privado. Información sobre el diseno del programa sugiere que algunas de sus características, tales como los encuentros comunitarios y entrega de información, pueden ser importantes para explicar estos efectos. Los hallazgos entregan evidencia sobre cómo programas sociales pueden tener un efecto doble sobre el bienestar de los hogares, tanto con su impacto directo así como en las dinámicas entre los hogares.

Suggested Citation

  • Sandra García & Jorge Cuartas, 2017. "With a Little Help from my Friends: the Multiplier Effect of Public Subsidies through Private Support," Documentos de trabajo 17647, Escuela de Gobierno - Universidad de los Andes.
    • Handle: RePEc:col:000547:017647
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    File URL: https://egob.uniandes.edu.co/images/books/DT/DT-48.pdf
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    References listed on IDEAS

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