Transformation and Vulnerability in Ethiopia Symposium 2016

1. ETHIOPIAN DEVELOPMENT
RESEARCH INSTITUTE
Does the timing of Public Work payments matter?
Welfare effects of delays in the PSNP payments
(2006 -2014)
Berhane, G., Abay, M.H., Hoddinott, J., and Abay, K. A.,
Transformation and vulnerability in Ethiopia:
New evidence to inform policy and investments
GETFAM Hotel, Addis Ababa
May 27, 2016
Addis Ababa
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 Safety net-oriented Public Works (PW) programs -
popular instruments of social protection schemes.
 Vast literature weighing successes of PW programs in view
of design features and implementation capacities.
 targeting , size of transfer, delivery, sustainability
 Evidence on overall successes of PW programs is mixed.
 Often plagued by implementation problems related to
the above design features.
 Little known about the optimal timing of payments in
terms of maximizing welfare gains
Motivation

3. 3
Key research questions?
 Study the welfare implications of delays in Public Works
payments:
 whether and to what extent improving the timing of
payments can improve household welfare.
 Insights to how PSNP payments can be best scheduled
 Should payments be made in small amounts
(regularly)?
 … be delayed and made in lump-sums later in the
hunger season?
 Do effects vary by welfare outcome, or objective?

4. 4
How would payment delays affect welfare?
 Effects of payment delays may depending on:
 Financial ‘flows’ and ‘needs’ of the receiver
- managing basics vs. raising lump-sums;
 When (season!) and how (size!) the delayed payment will
be paid
 Recent evidence suggesting the need for lump-sum
transfers to bring about lasting changes in the lives of
the poor.
 The poor are ‘saving constrained’
 The poor ‘lack’ self-control & are ‘present-biased’

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Data and Method
 Five rounds of panel data covering 2006 – 2014, from four
main regions that implemented the PSNP;
 Method: Pooled OLS and HH FE
 Exploiting variations in the timing of payments among
participants;
 Control for drought shocks, payment levels, drought*delay
 Welfare outcomes considered: household consumption,
income, assets, food gap, transfers; child nutrition &
schooling

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Defining delay: timing of PSNP Public Works and Payments
Public works, 2007 Public Works, 2008
Dec 2007
May 2008
Jan 2007 Jun 2007 Jan 2008 Jun 2008
Pre-survey year payment data Survey year payment data
 Public Works run in the first six months of the year (Jan –Jun).
 Payment schedule: end of public work month until mid next
month, otherwise considered delayed!

7. Descriptive Results

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% reported … as primary source of food, by month and year
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100% October
November
December
January
February
March
April
May
June
July
August
September
October
November
December
January
February
March
April
May
June
July
August
September
October
November
December
January
February
March
April
May
June
July
August
September
2010 2012 2014
Own production Purchase Private transfers PSNP Others

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Average number of days worked, by month and round, 2007-2013
0
2
4
6
8
10
12
14
16
18
20
Average#daysworked
2007
2009
2011
2013
Public work
months

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Average payments received for PW (in 2014 birr),
by month and round, 2007-2013
0
50
100
150
200
250
300
350
400
450Averagepaymentsreceived
2007
2009
2011
2013
Public work
months

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Timeliness of payment has improved over the years
Lumpiness
declines
over time
1 = # months
payment was
received /# PW
months done
Lumpy
payments in
early years

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% that received PW payments during (Jan-Jul)
and after (Aug-Dec) PW months
Percent (%)
year Jan-Jul Aug Sep Oct Nov Dec Total
2007 90.9 5.9 1.8 1.2 0.1 0.0 100
2009 92.0 3.4 2.9 1.2 0.3 0.2 100
2011 96.3 2.3 0.9 0.2 0.2 0.1 100
2013 95.3 2.2 0.8 0.6 0.6 0.6 100
Note: payments include both food and cash

13. Estimation Results

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 Using the monthly measure, we find that payment delay:
 decreases household consumption in March and April in the
range of 6-8 percentage points.
 Effect driven by food rather than non-food.
 Delay has also negative effects on some child growth and
schooling outcomes (using the aggregate measure):
 Increased wasting by 10 percentage points in March.
 Reduced the likelihood of grade achievement and increased the
average age children started schooling.
 Effects more pronounced when delays are preceded by bad
harvests.
Key results – negative

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Key results – positive
 Using the aggregate payment delay measure, we find positive
effects of delay on several outcomes;
 Increased livestock ownership (in TLU) and value of
livestock,
 Increased value of production assets, & income from
‘crop and livestock’ sales,
 Increased private transfers, and borrowings,
 Decreased distress sales of livestock and production
assets,
 Reduced food gap and the likelihood of facing acute
food shortages during the hunger season.

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Key conclusion: delay is not necessarily bad thing
1) payment delays reduce outcomes that are needed to be bridged
on daily basis (e.g., consumption).
… more so towards the start of the lean season.
2) Payments delayed well into the lean season and made in
lump-sums have strong positive effects …
– ‘right timing’, or ‘investment effect of the lumpy transfer’.
 Consistent with recent evidence:
“in addition to smaller periodical transfers, the poor need a
one-off lump-sum transfer”
 Implication: back up small, frequent payments, with lump-
sums. This supports the “livelihood transfers” in the livelihood
component of PSNP 4.

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guush.berhane@cigar.org