Welfare programs and labor supply in developing countries: experimental evidence from Latin America
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Welfare programs and labor supply in developing countries: experimental evidence from Latin America Mar´ıa Laura Alzua ´ · Guillermo Cruces · Laura Ripani
Received: 9 November 2011 / Accepted: 16 October 2012 / Published online: 11 December 2012 © Springer-Verlag Berlin Heidelberg 2012
Abstract This study looks at the effect of welfare programs on work incentives and the adult labor supply in developing countries. The analysis builds on the experimental evaluations of three programs implemented in rural areas: Mexico’s Programa Nacional de Educaci´on, Salud y Alimentaci´on (PROGRESA), Nicaragua’s Red de Protecci´on Social, and Honduras’ Programa de Asignaci´on Familiar. Comparable results for the three countries indicate that the effects that the programs have had on the labor supply of participating adults have been mostly negative but are nonetheless small and not statistically significant. However, the evidence does point to the presence of other effects on labor markets. In the case of PROGRESA, there is a small positive effect on the number of hours worked by female beneficiaries and a sizeable increase in wages among male beneficiaries and a resulting increase in household Responsible editor: Erdal Tekin Electronic supplementary material The online version of this article (doi:10.1007/s00148-012-0458-0) contains supplementary material, which is available to authorized users. M. L. Alz´ua · G. Cruces () CEDLAS, Centro de Estudios Distributivos, Laborales y Sociales, Facultad de Ciencias Econ´omicas, Universidad Nacional de La Plata, Calle 6 N. 777, 1900 La Plata, Argentina e-mail: [email protected] M. L. Alz´ua · G. Cruces CONICET, Buenos Aires, Argentina G. Cruces IZA, Bonn, Germany L. Ripani Labor Markets and Social Security Unit (LMK), Inter-American Development Bank (IDB), 1300 New York Avenue NW, Washington, DC 20577, USA
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labor income. Moreover, PROGRESA seems to have reduced female labor-force participation in ineligible households. These results imply that large-scale interventions may have broader equilibrium effects. Keywords Welfare programs · Income support · Labor supply · Work incentives · Conditional cash transfers · Randomized control trials · Developing countries JEL Classification J08 · J22 · I38
1 Introduction This study explores the effect of welfare programs on work incentives and the adult labor supply in developing countries. The analysis builds on the experimental evaluations of three programs implemented in rural areas in Latin America: Mexico’s Programa Nacional de Educacion, Salud y Alimentacion (PROGRESA), Nicaragua’s Red de Protecci´on Social (“Social Protection Network”) (RPS), and Honduras’ Programa de Asignaci´on Familiar (“Family Allowance Program”) (PRAF). The study takes advantages of the random assignment of localities to program deployment and control groups and presents comparable estimates of impacts on the adult labor supply and remuneration levels. These estimates are based on homogeneous datasets and were arrived at through the use of a co
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