ETHIOPIAN DEVELOPMENT
RESEARCH INSTITUTE
Spillover Effects of Cash Transfers:
What Does LEWIE Have to Say?
Mateusz Filipsk...
INTRO
A question and a story
• Cash transfers target the “labor-constrained,
asset-poor”
Can they stimulate production?
• “Once ...
From Protection to Production?
• Spillovers can stimulate the economy (ag, nonag, retail,
services, etc.)
• Need to look a...
Who’s LEWIE?
• Local Economy-Wide Impact Evaluation
• Model tailored to capture those local effects.
• Structural simulati...
What can LEWIE do for us?
• Ex-ante picture of WHERE to look for impacts,
including in the non-treated economy
• Understan...
Transfer
Rest of Kenya
RestofWorld
Spillovers
Feedbacks
Who provides the extra supply?
Is that supply elastic?
Factors?
Kenya’s CT-OVC Program
• Goal: to help Orphans and Vulnerable Children (OVC)
• Unconditional cash transfer
• Ultra-poor ho...
What did we find for Kenya?
• Each KSh transferred increases the nominal value of
total production in the treated economy ...
METHODOLOGY
What is LEWIE?
• Local Economy-Wide Impact Evaluation
• Nests models of farm-households within a rural
economy
• Calibrate...
LEWIE follows the pilot program design
75.5 Ksh = US$1
Treatment Villages Control Villages
OVC, Eligible A. 591 B. 397
OVC...
Household-farm economy
,
,
,
h good
h good h
h good
QC Y
P
FDh, factor
Ph,good
QPh,good h, factor
Ph, factor
Yh
Endowfac
W...
Treated Economy
QCh,good
h,good
Ph,good
Yh
FDh, factor
Ph,good
QPh,good h, factor
Ph, factor
Yh
Endowfac
Wfac
Factors
,
, ...
Treated Economy
Treated
Non-
Treated Rest of
World
Manufactured goods,
purchased inputs
Crops, livestock,
retail, services...
RESULTS
Simulating the pilot
PLEASE DO NOT CITE OR
• Transfer 10.6m to household group A
• Let the model solve
• Record simulated ...
Effects on Production
PLEASE DO NOT CITE OR
Production multiplier for: Mean 90% CI
Total 1.14 (1.03,1.25)
By Household
A –...
Effect on Income
PLEASE DO NOT CITE OR
Multiplier CI
Total Income Y
Nominal 1.81 (1.17 – 1.89)
Real 1.22 (1.14-1.30)
Addit...
Relaxing Tightening
high low
free fixed
1.54 0.93
( 1.49- 1.60) ( 0.87- 0.99)
Importance of market closures
PLEASE DO NOT ...
CONCLUSIONS
Good News (and a Caveat)
• The impacts of social cash transfers appear to
significantly exceed the ATT
• …but local supply...
Plans for Ethiopia
• Use such simulations to evaluate PSNP context
• GE approach even more relevant in PSNP context:
– Pub...
Thank you
Contact: m.filipski@cgiar.org
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Spillover Effects of Cash Transfers: What Does LEWIE Have to Say?

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International Food Policy Research Institute (IFPRI) and Ethiopian Development Research Institute (EDRI) in collaboration with Ethiopian Economics Association (EEA). Eleventh International Conference on Ethiopian Economy. July 18-20, 2013

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  • 2 things from this picture – ge effects (feedback) and spillovers, generally
  • about 22% of households are eligible/reatedPMT and community valuation
  • Each houeshold can be described with these 4 functions. We assume usual functional forms for simulation models - cobb-douglasspdtn, stone-geary expenditure
  • Spillover Effects of Cash Transfers: What Does LEWIE Have to Say?

    1. 1. ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE Spillover Effects of Cash Transfers: What Does LEWIE Have to Say? Mateusz Filipski (IFPRI DSGD) J. E. Taylor, K.E. Thome (UC-Davis) Benjamin Davis (FAO) Ethiopian Economic Association Conference July 19, 2013 Addis Ababa 1
    2. 2. INTRO
    3. 3. A question and a story • Cash transfers target the “labor-constrained, asset-poor” Can they stimulate production? • “Once upon a time in Mexico … …“I don’t get Progresa, but tomorrow buyers will be lining up here” Spillovers to non-recipients Local GE effects
    4. 4. From Protection to Production? • Spillovers can stimulate the economy (ag, nonag, retail, services, etc.) • Need to look at full impact, not just impact on the treated
    5. 5. Who’s LEWIE? • Local Economy-Wide Impact Evaluation • Model tailored to capture those local effects. • Structural simulation model of a rural economy (think: a cousin of CGE models)
    6. 6. What can LEWIE do for us? • Ex-ante picture of WHERE to look for impacts, including in the non-treated economy • Understand WHY we see impacts, not just whether. • Laboratory for exploring alternative designs / complementary interventions/ scale-up program • Work in synergy with RCT methods (same data)
    7. 7. Transfer Rest of Kenya RestofWorld Spillovers Feedbacks Who provides the extra supply? Is that supply elastic? Factors?
    8. 8. Kenya’s CT-OVC Program • Goal: to help Orphans and Vulnerable Children (OVC) • Unconditional cash transfer • Ultra-poor households with OVCs • ~18% of income for the treated households – Ksh 1500 (approximately US$21)/month – 129,526 households in 2011; scale-up to 300,000
    9. 9. What did we find for Kenya? • Each KSh transferred increases the nominal value of total production in the treated economy by 1.14 shillings (90% CI: [1.03,1.25]) • Most of this impact is on non-eligible households • Spillovers depend critically on supply response in the local economy. Inflation vs Expansion
    10. 10. METHODOLOGY
    11. 11. What is LEWIE? • Local Economy-Wide Impact Evaluation • Nests models of farm-households within a rural economy • Calibrated directly from survey data – The baseline data of an RCT • Incorporates confidence bounds – Monte-Carlo approach to calibration
    12. 12. LEWIE follows the pilot program design 75.5 Ksh = US$1 Treatment Villages Control Villages OVC, Eligible A. 591 B. 397 OVC, Ineligible C. 465 D. 654 No OVC, Ineligible E. 5569 F. 5644 Total Transfer in Ksh 10,638,000 Household Group Eastern Region (Garissa and Kwale)
    13. 13. Household-farm economy , , , h good h good h h good QC Y P FDh, factor Ph,good QPh,good h, factor Ph, factor Yh Endowfac Wfac Factors , , , g f h good h h f f Factors QP A FD Production and Consumption behavior
    14. 14. Treated Economy QCh,good h,good Ph,good Yh FDh, factor Ph,good QPh,good h, factor Ph, factor Yh Endowfac Wfac Factors , , , g f h good h h f f Factors QP A FD • Marketed Surplus (for household) Produced Marketed Surplus Consumed Used as InputsEndowments Treated Non- Treated , , , , ,h g h g h g h g h gMS QP E QC ID
    15. 15. Treated Economy Treated Non- Treated Rest of World Manufactured goods, purchased inputs Crops, livestock, retail, services, labor • Market Closures (for village)
    16. 16. RESULTS
    17. 17. Simulating the pilot PLEASE DO NOT CITE OR • Transfer 10.6m to household group A • Let the model solve • Record simulated impacts • Repeat 500 times to compute confidence bounds (Monte Carlo).
    18. 18. Effects on Production PLEASE DO NOT CITE OR Production multiplier for: Mean 90% CI Total 1.14 (1.03,1.25) By Household A – Eligible 0.05 (0.03,0.07) C- Non-eligible 0.35 (0.23,0.47) E- Non-eligible 0.74 (0.58,0.89)
    19. 19. Effect on Income PLEASE DO NOT CITE OR Multiplier CI Total Income Y Nominal 1.81 (1.17 – 1.89) Real 1.22 (1.14-1.30) Additional real income is captured by NON-recipients
    20. 20. Relaxing Tightening high low free fixed 1.54 0.93 ( 1.49- 1.60) ( 0.87- 0.99) Importance of market closures PLEASE DO NOT CITE OR Base scenario Elasticity of labor supply high Inputs and capital supply fixed Total Income multipliers Real 1.22 (CI) ( 1.14- 1.30) Example of how structure helps explain “why” we see impacts
    21. 21. CONCLUSIONS
    22. 22. Good News (and a Caveat) • The impacts of social cash transfers appear to significantly exceed the ATT • …but local supply constraints may dampen these impacts considerably What can be done to reap maximum benefits from the Cash Transfer?
    23. 23. Plans for Ethiopia • Use such simulations to evaluate PSNP context • GE approach even more relevant in PSNP context: – Public works intervention, benefits clearly not limited to recipients • 8 woredas and about 20 kebeles – Build local LEWIE models for each – Simulate the joint effect of transfers + public works • Agricultural productivity • Market integration (tradables vs non-tradables, t-costs) – Simulate impacts on the whole community, transfer recipients and non-recipients. • See you next year for the results!
    24. 24. Thank you Contact: m.filipski@cgiar.org

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