“With their effort and one opportunity”: alleviating extreme poverty in Chile

1. “With their effort and one opportunity”: alleviating extreme poverty in Chile Emanuela Galasso Development Research Group, The World Bank Presentation at the Inter-American Development Bank February 20, 2007

2. Outline • Context • The (complex) nature of the intervention • The evaluation challenge: identification strategy • Empirical method • Data. Sampling issues • Results • Extensions, refinements • Conclusions/looking forward

3. The context: poverty trends in the 1990s • Sustained growth in 1990s in Chile (average 4.5%) • With stable distribution, overall poverty rate went down. stable reduction poverty incidence • growth did not trickle down to the extreme poor • despite: • Increases over time in spending on social sectors • highly targeted social assistance Poverty assessment

4. The context: constraints for households in extreme poverty? • Low take-up of means-tested social programs among the poorest: the problem compounded by the multidimensionality of their needs and deprivations coupled with exposure to correlated shocks. • Echoes welfare literature in the US (Moffitt 1983, Currie 2003).. • Lack of information about their existence, rules, benefits • Stigma • Transaction costs/Administrative barriers • …and the new behavioral economics (Bertrand, Mullainathan, Shafir 2006) • Time-inconsistency (costs born today, benefits in the future) • Time horizon? • ‘Small hassle costs’ may dissuade from action • CCTs work around the problem by using conditionalities

5. The context: novelty diagnostics importance of psychosocial dimension • Households are excluded from the network of social assistance/protection. Lack of communication between public institutions and beneficiaries. Vertical relationship. • Need to be visible and feel they can access the system when needed. • psycho-emotional dimension as a household endowment: The principal asset that indigent households have is their desire to live as a family and their complex web of mutual support that it entails. • Starting point is to restore this asset by reactivating capacity to project themselves forward by expand the set of opportunities • “desesperanza aprendida” vs capacity to project forward. Reactivation willingness to take charge (‘salir adelante’, ‘surgir en la vida’, develop ‘un projecto de vida’) • Capacity to activate actions, self-esteem

6. The program Chile Solidario • Government proactively introduced in 2002 a social protection program targeted to the extreme poor. • Flagship program of former president Lagos, instituted by law • Scaled up a pilot program (Puente) nationally. (bottom 5%: 225,000 beneficiary households) • Comprehensive/innovative approach focused on both demand and supply side • Demand side: multidimensional aspects of deprivation. Psychosocial support • Supply side: proactive supply of assistance and protection (vs working on demand), reorganize supply to attend the multiple needs of such target population

7. 2. The nature of the intervention Demand side • All municipalities in the country agreed to participate • Households are eligible to participate based on their proxy means score (based on ficha CAS) • i.e. targeting based on correlates of ‘chronic’ poverty • Households starting with the lowest CAS scores are nvited to participate in the program by the municipality. About 96% accept. Enter intensive phase w/social worker Follow-upphase 3 years Intensivephase Psycho-social support 2 years

8. 2. The nature of the intervention Demand side:(i) “working directly with the families” Intensivephase Psycho-social support 2 years • Multidimensionality of welfare and ‘rights’ operationalized through a set of a set of minimum conditions (‘condiciones minimas’) along different dimensions of well-being (identification, family dynamics, education, health, housing, employment, income) • Social worker visits regularly the participating families at their place: • Diagnostics: families share problems and identify priorities. acknowledge their assets and discuss deprivations along the 7 dimensions and (first 6 months) • identify conditions with highest priority (degree of deprivation and vulnerability): households sign partial contractswith the social workers (compromisos especificos)

9. 2. The nature of the intervention Demand side:(ii) short term assistance Follow-upphase 3 years Intensivephase Psycho-social support 2 years • Access to targeted monetary transfers Cash transfers Bono proteccion Bono egreso • elicit demand of social assistance/transfer program to which participating households are already eligible to (family allowances, public pensions, water subsidy, subsidy for school retention) • cash transfer in the first 2 years tapered over time (21$/month first 6 months, to 6$/month last 6 months) • smaller cash transfer in the follow-up phase

10. 2. The nature of the intervention Demand side:(iii) medium term -promotion Follow-upphase 3 years Intensivephase Psycho-social support 2 years • preferential access to social services Help develop household endowments (assets, skills, abilities, knowledge, autonomy) to: • know how/where to access system when faced by shocks if needed • sustain their exit from extreme poverty in the medium/long run Ex. priority access to public primary health care, priority access to public employment programs, schools visited by beneficiary households receive vouchers for school retention

11. 2. The nature of the intervention Comparison with other CCT programs: • Dimensions go beyond health and education • Short term cash assistance complemented with programs aimed at strengthening earning capacity/remove structural constraints. Implicit social protection role: make the red de proteccion social when faced by a shock • Cash transfer (bono de protección) size: • median share of income 6-7% , vs 22% Mexico, 25% Honduras, Nicaragua • Average monthly transfer PPP-adjusted per family: US 22$ vs 82$ Mexico (62 education, 21 nutrition), 85$ Nicaragua • Cash transfer (and intervention) with a specific time-limit (policy debate about exit strategies for other CCTs) • Conditionality: not attached to behavioral requirement (school attendance, health visits). Risk being dropped by the program if not showing effort towards the partial contracts

12. 2. The nature of the intervention Supply side:“re-orientation public services” • Reach out and identify households in needs rather than responding passively to demand by applicants • Allow coordination of the local services: existence/availability but also ‘pertinencia’ of the supply side to meet the needs of the target population • Social workers in the municipality coordinated by a municipal employee (head Unidad de Intervencion Familiar) – focal point all actors involved in the provision of services • Over time, some local municipalities introducing new activities tailored to the target group (creation ‘redes locales de intervencion’) “social protection system”

13. 3.The evaluation challenge: questions • Was the program effective in improving in lifting the targeted households out of extreme poverty (andsuggestive channels) • Future questions: sustainability and dynamics: • what happens to the participants after they live the program? • Does the program helps households to sustain their exit from extreme poverty over time? • what are the characteristics of those households that are more/less successful in doing so? Move beyond mean impact

14. 3. The evaluation challenge… • Very complex intervention • Impact develop over time • MIDEPLAN asked for World Bank’s TA in 2003, after project had started. Program already in place, staggered in 4 waves (2002-2005), starting from the bottom of the CAS distribution and up • With aimed universal coverage of the extreme poor, can we find comparable non-participants? (issue of common support)

15. 3. In the quest for identification: features of program design/implementation • Different distributions of the scores across areas: households within municipalities are sequentially invited to participate to the program, by starting from the bottom up of their CAS distribution. But the support and distribution varies across municipalities CAS threshold

16. 3. In the quest for identification: features of program design/implementation • Cut-off points for eligibility are different across different geographic areas (based on population/poverty rates)

17. 4. Empirical methodology • Households invited to participate based on an observable score • Different distribution and range of the CAS across municipalities/regions • Cutoff thresholds vary acrossmunicipalities/regions [observed] two households with the same CAS score but living in two different municipalities/regions face different probability of being exposed to the program

18. 4. Empirical methodology • regression discontinuity design (comparing households around cutoff) (parametric van der Klaaw 2002; Chay, McEwan, Urquiola 2005) Underlying assumptions: • probability participation discontinuous around the cutoff • No discontinuity in the counterfactual outcomes at the cutoff

19. 4. Empirical methodology • Average treatment effect for the participants estimated by matching on the CAS score (Abadie, Imbens 2006): under unconfounded assignment (selection based on observables): Conditioning on the score, adjusting for any underlying differences in exogenous background characteristics

20. 5. Data • Agreed to add a module on Chile Solidario to the forthcoming nationally representative household survey (CASEN) in November 2003. • Captured (and over-sampled) participants in the early cohorts (2002-2003) • Subsequent participants (2004-2005) identified in the original CASEN by cross-checks with the administrative data • Plan: follow up longitudinally a selected sub-sample of participants and ‘matched’ comparison group of non-participants over time (one-year intervals) until 2009

21. 5. Data: Structure of the panel Admin. Data PANEL ‘06 CS participants CASEN ‘03 PANEL’ 04 CASEN ’06 225,000 73,000 13,000 8,200 2002 2003 2004 2005

22. 5. Data • Order in the score (CAS) followed over time

23. 5. Data: CAS distribution and cutoff ranges Panel sample 2003-2004: households with CAS score

24. 5. Data: non parametric plots around cutoff Preschool enrollment Enrollment school 6-15

25. 5. Data: non parametric plots around cutoff Log hh’ld income p.c. Log hh’ld labor income p.c

26. 5. Data: non parametric plots around cutoff CAS score

27. 5. Data: some descriptive statistics • Targeting (2003 CASEN): 25% CS participants are in the bottom 5% income pc distribution, 45% are in the bottom 10% of the distribution • 2/3 have no schooling or incomplete primary • 70% have both head and spouse present • 40% heads are married, 25% are in a union • 10-13% belong to ethnic minorities • ¼ have a disabled member • Subjective well-being: about 40% believed that their socio-economic situation during childhood was better, about 16% feel they do not have any social support, about ½ are aware of public programs in the community • Within the same household: subjective perceptions of the spouse are more optimistic

28. 6. Results • Time horizon: first 2 years of operation, virtually all participants still in the intensive phase– short term impact • Unit of analysis: household • Outcome space: • Income (and income sources) • intermediate indicators key in understanding the channels of impact (labor supply, education, health, housing, perceptions, take-up of various social programs) • Separate analysis urban/rural • Separate analysis by year panel (2003,2004).

29. 6. Results Income/employment • Strong take-up of employment programs (self-employment (30% u 14% r), public employment (4-6%), training, enrolment in local unemployment offices) • No effect on employment outcomes (share household members who are employed). Marginal significance of share of actives in rural area), [timing issue?] • No effect on total or labor income • Take-up of some social assistance transfers (family allowance SUF 15% ) Housing • Take-up of housing programs in urban areas. No effect in rural areas, even controlling for municipality effects • Participants significantly more likely to have received help to protect household from rain, basic equipment

30. 6. Results Humancapital: education • Positive effects on enrolment in pre-school (4-6%), school enrolment 6-15 years old (7-9%) • Higher enrolment of adults in adult literacy programs = 4-5 pct Human capital: health • Participants more likely to be registered in the public system (2-3%) • Higher preventive visits for children<6 (4-6%) and women>35 (6-7%) in rural areas only Perceptions/orientation towards the future • significant differences in awareness of local programs, optimism about the future economic situation

31. 7. Extensions: complementarities Use unit-level matching estimates to explore: • Complementarities: correlation of gains along different dimensions (multidimensionality/comprehensiveness intervention) • optimism about the future has stronger association with health and education improvements in rural areas, and with labor income gains in urban areas

32. 7. Extensions: observed heterogeneity • How do gains relate to socio-economic characteristics of the participating households, community characteristics • Larger variance within municipalities rather than across. Same for individual effects of the social worker • Human capital gains larger for younger households (age/life cycle) • Income and labor effects stronger for earlier cohorts in urban areas (timing). • Timing also matters for takeup of self-employment programs and enrollment in labor unemployment offices • Labor gains stronger for heads with previous LF history

33. 7. Extensions: supply side? • Supply side coordination activated from 2004 onwards. • controlled for time-invariant effects at the municipality level (rationing), thought to be more binding for a subset of programs (ex. housing projects and adult education literacy). • Suggestive evidence on implementation issues: plan to use monitoring data at the municipal level available for social workers (Unidad de Intervencion Familiar’) for internal diagnostics: • Set of qualitative indicators about functioning social protection network (‘red local de intervencion’): responsiveness to the needs of the target population, willingness to cooperate, coordination between different institution, flexibility to adapt, • Collected Nov. 05- Jan 06, planned to be re-administered in early 2007

34. 8. Conclusions • The estimated gains from participating to Chile Solidario in the short run, for households in the psychosocial support phase • Strong uptake of social programs, according to program objectives • Positive effects on education (preschool and primary enrolment, adult education), and health (preventive visits children, women) • Perceptions: improved awareness of the existence of social services, improved projection towards the future • No estimated gains on labor supply nor income, though heterogeneity of the results seem to be supportive of the timing effect

35. 8. Conclusions: Open questions on medium term effects New round panel 2006 in conjunction of the CASEN: in 2006 a substantial fraction participants exited the two-years of psychosocial support • Will income gains be materialized in the future? Gains in other dimensions sustained? If so For whom? Sustainability of the joint effect and its subcomponents? • Program targeted on chronic poverty but aiming at reducing vulnerability: role program as a building block of a social protection system? (de Janvry/Sadoulet et al 2006)

36. 8. Conclusions: Going forward • Evidence high mobility for lower income deciles (Contreras et al, panel CASEN 1996-2001) • Adverse consequences of uninsured shocks: main self-reported shocks that “negatively effected your household’s economic situation” in Chile are recession/loss job (30%) and sickness/cost illness (20%) Packard, 2000) • Evidence high mobility for lower income deciles (Contreras et al, panel CASEN 1996-2001) • Adverse consequences of uninsured shocks: main self-reported shocks that “negatively effected your household’s economic situation” in Chile are recession/loss job (30%) and sickness/cost illness (20%) Packard, 2000) • With at least three data point can start assessing the (e.g. impact on the variance on income, beyond first moments or risk-coping ability)

37. 8. Conclusions: Going forward • New round panel 2006: Newly added survey instruments to capture role of the psycho-social support (U. Catolica – Dept. Psicologia, U. Berkeley – School of Public Health) • ‘Autonomia’/self-efficacy • Social networks (private/public) • Orientation towards the future • Psychological distress

38. Distribution CAS across regions..

39. Probability of participation around CAS cutoff

40. Timing of interactions with social worker Frequency

41. Contratos parciales: distribution by dimensions

42. Contratos parciales: within each dimension