The Contribution of Increased Equity to the Estimated Social Benefits from a Transfer Program
Most impact evaluations of Conditional Cash Transfers (CCTs) and Unconditional Cash Transfers (UCTs) focus on the returns to increased human capital investments that will be reaped largely or exclusively in the future (e.g., when current children have increased productivities as adults). But the objectives of these programs are not only to increase human capital investments with implications for future levels and distributions of income but also to alleviate current poverty and reduce current inequality. The current distributional gains from such programs depend on the degree of inequality aversion in the social welfare function. Simulations show that, for a range of inequality aversion parameters, the welfare gains from current redistribution for the Mexican PROGRESA CCT program can be as large, or possibly much larger, than the estimated present discounted value of future earnings from human capital investments in lower and upper secondary schooling. These, moreover, are underestimates of the gains from redistribution because, in addition to current gains, such gains will be augmented in the future through the distribution of the returns on the human capital investments induced by cash transfer programs. Therefore, to fully evaluate such programs, it is critical to incorporate the distributional gains, not only the impacts on human capital investments.
Main Authors: | , , |
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Format: | Working Paper biblioteca |
Language: | English en_US |
Published: |
World Bank, Washington, DC
2017-04
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Subjects: | CASH TRANSFERS, REDISTRIBUTION, PROGRAM EVALUATION, CONDITIONAL CASH TRANSFERS, INEQUALITY, HUMAN CAPITAL, |
Online Access: | http://documents.worldbank.org/curated/en/897871491831102595/The-contribution-of-increased-equity-to-the-estimated-social-benefits-from-a-transfer-program-an-illustration-from-PROGRESA-oportunidades https://hdl.handle.net/10986/26371 |
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Summary: | Most impact evaluations of Conditional
Cash Transfers (CCTs) and Unconditional Cash Transfers
(UCTs) focus on the returns to increased human capital
investments that will be reaped largely or exclusively in
the future (e.g., when current children have increased
productivities as adults). But the objectives of these
programs are not only to increase human capital investments
with implications for future levels and distributions of
income but also to alleviate current poverty and reduce
current inequality. The current distributional gains from
such programs depend on the degree of inequality aversion in
the social welfare function. Simulations show that, for a
range of inequality aversion parameters, the welfare gains
from current redistribution for the Mexican PROGRESA CCT
program can be as large, or possibly much larger, than the
estimated present discounted value of future earnings from
human capital investments in lower and upper secondary
schooling. These, moreover, are underestimates of the gains
from redistribution because, in addition to current gains,
such gains will be augmented in the future through the
distribution of the returns on the human capital investments
induced by cash transfer programs. Therefore, to fully
evaluate such programs, it is critical to incorporate the
distributional gains, not only the impacts on human capital investments. |
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