Gary Mena: Intended and unintended effects of unconditional cash

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This presentation is part of the programme of the International Seminar "Social Protection, Entrepreneurship and Labour Market Activation: Evidence for Better Policies", organized by the International Policy Centre for Inclusive Growth (IPC-IG/UNDP) together with Canada’s International Development Research Centre (IDRC) and the Colombian Think Tank Fedesarrollo held on September 10-11 at the Ipea Auditorium in Brasilia.

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Gary Mena: Intended and unintended effects of unconditional cash

  1. 1. Motivation Renta Dignidad Data and Methods Effects Summarizing. . . Intended and unintended effects of unconditional cash transfers The case of Bolivia’s Renta Dignidad Werner Hernani-Limarino Gary Mena Fundación ARU International Seminar on Social Protection, Entrepreneurship and Labour Market Activation Brasilia - September, 2014
  2. 2. Motivation Renta Dignidad Data and Methods Effects Summarizing. . . 1 Motivation 2 Renta Dignidad Program Design 3 Data and Methods Data Methods 4 Effects Welfare Investments and savings Labor market outcomes 5 Summarizing. . .
  3. 3. Motivation Renta Dignidad Data and Methods Effects Summarizing. . . Motivation
  4. 4. Motivation Renta Dignidad Data and Methods Effects Summarizing. . . Motivation Why should we study the effects of Renta Dignidad on labor market outcomes and household investments? 1. Important changes in Bolivia during the 2000’s, but high levels of gender inequality in the labor market remain According to household surveys, Inequality (Gini) has decreased from 59 to 46 (Eid and Hernani, 2013). Extreme and moderate poverty rates have decreased in 55 and 32%, respectively (Hernani and Uribe, 2013). Quality of labor market insertion (measured as pc labor income) of women is half of that of men. (Hernani and Mena, 2014). Gaps in labor market participation and paid employment account for almost 90% of the gap in quality of labor market insertion. According to the census data Important demographic changes. Dependency ratio has changed from 77.9 (2001) to 66.8% (2012). 2. Not much is known about the effect(s) of RD on labor market outcomes and household investments in Bolivia. (Martínez (2004); Loza, Martínez y Mendizábal (2013))
  5. 5. Motivation Renta Dignidad Data and Methods Effects Summarizing. . . Gender inequalities in the Bolivian labor market (Hernani and Mena 2014) gaps in labor market outcomes 1.2 1 .8 .6 .4 .2 Proportion women/men 1999 2001 2003 2005 2007 2009 2011 pc labor income participation paid employment hours wage 1.2 1 .8 .6 .4 .2 Proportion women/men 1999 2001 2003 2005 2007 2009 2011 pc labor income participation paid employment hours wage 1.2 1 .8 .6 .4 .2 Proportion women/men 1999 2001 2003 2005 2007 2009 2011 pc labor income participation paid employment hours wage pc labor income gap decomposition 9 46 45 3 50 47 7 51 41 4 51 45 7 53 40 8 48 44 8 49 42 8 49 43 7 49 44 11 49 40 8 49 43 10 46 44 10 36 54 100 80 60 40 20 0 % 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2011 2012 participation gap paid employment gap income gap (a) Bolivia 17 15 68 16 15 69 21 19 60 16 20 63 16 28 57 18 17 65 16 22 62 16 21 63 15 17 68 17 24 59 15 21 64 14 22 64 16 17 68 100 80 60 40 20 0 % 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2011 2012 participation gap paid employment gap income gap (b) Urban 9 73 19 3 76 20 4 76 19 2 77 21 6 76 18 6 76 18 6 77 17 4 78 18 5 82 14 8 76 16 5 77 18 8 75 17 8 61 31 100 80 60 40 20 0 % 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2011 2012 participation gap paid employment gap income gap (c) Rural
  6. 6. Motivation Renta Dignidad Data and Methods Effects Summarizing. . . Renta Dignidad
  7. 7. Motivation Renta Dignidad Data and Methods Effects Summarizing. . . Program Design Program Design Renta Dignidad RD is a benefit for all the Bolivians that consists of non inheritable lifetime payments in favor of people no younger than 60 and a burial allowance. Not the first of its kind in Bolivia, though: 1997 1998-1999 2001-2002 2003-2007 2008-2012 2013+ Bonosol Bolivida Bonosol Renta Dignidad Annuity Monthly (cumulative) Beneficiaries +65 +60 Contributory pensions $US 248 Suspended $US 120 $US 248 $US 21(248) $US 27 (300) No contributory pensions $US 27 (300) $US 34 (413) Funding: fixed share of the special direct tax on hydrocarbons (impuesto directo a los hidrocarburos (IDH)), with contributions from all levels of government, and dividends from capitalized public enterprises. the current non-contributory pension scheme was included in the new Bolivian Constitution (2009, Art. 60) as a right of Bolivian citizens [. . . ] the state will provide an old-age pension, under the framework of an integral social security system.
  8. 8. Motivation Renta Dignidad Data and Methods Effects Summarizing. . . Data and Methods
  9. 9. Motivation Renta Dignidad Data and Methods Effects Summarizing. . . Data Why do we use households survey data Table : Available data sources in Bolivia to study Renta Dignidad Variables HS ’05-’11 HS 2011 EPAM 2011 ETE 2009-2010 Full sample 114,476 (29,000) 33,821 (8,851) 9,176 (2,478) ?? age2 [55, 60) 3,889 1,242 1,109 ?? age2 [60, 65) 3,132 982 925 ?? age2 [65, 70) 2,581 779 772 ?? age2 [55, 99) 13,792 4,270 3,923 ?? Labor market supply LM participation X X X X hours worked (intensity X X n.a. X of supply) Sector of employment Family Worker X X X X Self-employed X X X X Informal salaried X X ? X Formal salaried X X n.a. X Household variables Income X X X X Consumption X X X n.a. Savings X X X n.a. Education expenditure X X X n.a. Health expenditure X X ? n.a. Durables expenditure X X n.a. n.a. Dwelling’s investment X X n.a. n.a. Number of households in parentheses. n.a.= non available. HS=Houhsehold surveys; EPAM=Encuesta a hogares con Personas Adultas Mayores; ETE= Encuesta Trimestral de Empleo.
  10. 10. Motivation Renta Dignidad Data and Methods Effects Summarizing. . . Data Basic setup 2groups x 2periods case: sample sizes For individual outcomes we have: G = {0, 1} T = {0, 1} G0=agei 2 [55, 60) G1=agei 2 [60, 64) T0=2005-2007 Bolivia =1,519 Bolivia =1,217 Men =716 Men =581 Women =803 Women =636 T1=2008-2011 Bolivia =2,364 Bolivia =1,912 Men =1,157 Men =944 Women =1,207 Women =968 For household outcomes we have more combinations available. They are classified according to the age of the oldest family member. We further classify households based on whether all of the individuals in the age interval are men, women or if the household has both (in the age interval). G0=agehhmaxage 2 [55, 60) G1=agehhmaxage 2 [60, 64) T0=2005-2007 Bolivia =953 Bolivia =791 only G0 men =434 only elderly men =370 only G0 women =336 only elderly women =286 w+m =183 w+m =135 T1=2008-2011 Bolivia =1,491 Bolivia =1,289 only G0 men =709 only elderly men =603 only G0 women =509 only elderly women =460 w+m =273 w+m =226 Note: observations with 0 or missing pc income or pc consumption where excluded from household sample
  11. 11. Motivation Renta Dignidad Data and Methods Effects Summarizing. . . Data Household outcomes (means) Bolivia Only men IAI Only women IAI Both [55, 60) [60, 64) DID [55, 60) [60, 64) DID [55, 60) [60, 64) DID [55, 60) [60, 64) DID pc income (log 2012 Bs. a month) T=0 6.32 6.19 6.39 6.29 6.32 6.09 6.18 6.12 [0.05] [0.05] 0.17 [0.07] [0.08] 0.14 [0.07] [0.09] 0.36 [0.11] [0.13] -0.11 T=1 6.51 6.55 [0.09]** 6.57 6.61 [0.13] 6.46 6.60 [0.14]*** 6.45 6.28 [0.20] [0.03] [0.03] [0.05] [0.05] [0.06] [0.05] [0.08] [0.08] pc consumption (log 2012 Bs. a month) T=0 6.44 6.45 6.39 6.51 6.50 6.43 6.41 6.33 [0.03] [0.03] 0.00 [0.04] [0.04] -0.10 [0.04] [0.05] 0.11 [0.05] [0.06] 0.02 T=1 6.65 6.66 [0.05] 6.68 6.70 [0.08] 6.66 6.70 [0.09] 6.55 6.51 [0.11] [0.02] [0.02] [0.03] [0.03] [0.03] [0.04] [0.05] [0.05] pc labor income (thousands of 2012 Bs. a month) T=0 0.90 0.75 1.11 0.86 0.69 0.63 0.82 0.74 [0.05] [0.05] -0.09 [0.08] [0.08] 0.05 [0.07] [0.08] -0.17 [0.09] [0.11] -0.27 T=1 1.06 0.82 [0.09] 1.18 0.98 [0.16] 0.95 0.71 [0.14] 0.94 0.59 [0.16]* [0.05] [0.04] [0.08] [0.07] [0.07] [0.05] [0.06] [0.05] pc non-labor income (thousands of 2012 Bs. a month) T=0 0.26 0.31 0.26 0.28 0.30 0.37 0.23 0.25 [0.04] [0.03] 0.17 [0.08] [0.03] 0.13 [0.04] [0.05] 0.22 [0.05] [0.04] 0.17 T=1 0.14 0.35 [0.05]*** 0.14 0.31 [0.09] 0.15 0.44 [0.08]*** 0.11 0.30 [0.08]** [0.01] [0.02] [0.02] [0.03] [0.02] [0.04] [0.02] [0.04] pc intrahousehold transfers (thousands of 2012 Bs. a month) T=0 0.09 0.10 0.06 0.05 0.13 0.17 0.07 0.06 [0.01] [0.02] 0.00 [0.02] [0.01] -0.01 [0.02] [0.04] 0.02 [0.03] [0.02] 0.01 T=1 0.07 0.08 [0.02] 0.06 0.05 [0.02] 0.09 0.15 [0.05] 0.04 0.03 [0.04] [0.01] [0.01] [0.01] [0.01] [0.01] [0.03] [0.01] [0.01] Note: Standard Errors in brackets. IAI=in age interval. Deflated with CPI base December 2012
  12. 12. Motivation Renta Dignidad Data and Methods Effects Summarizing. . . Data Household outcomes (means) Bolivia Only men IAI Only women IAI Both [55, 60) [60, 64) DID [55, 60) [60, 64) DID [55, 60) [60, 64) DID [55, 60) [60, 64) DID Saving ratey : (y-c)/y T=0 -1.05 -1.77 -1.05 -1.53 -0.95 -2.20 -1.22 -1.53 [0.22] [0.31] 1.10 [0.43] [0.48] 0.99 [0.18] [0.52] 1.69 [0.35] [0.64] 0.17 T=1 -1.08 -0.70 [0.42]*** -1.08 -0.56 [0.68] -1.03 -0.59 [0.60]*** -1.17 -1.31 [0.96] [0.15] [0.09] [0.19] [0.09] [0.20] [0.10] [0.51] [0.38] Saving ratec : (y-c)/c T=0 0.29 0.12 0.46 0.15 0.11 0.07 0.23 0.15 [0.04] [0.03] 0.13 [0.08] [0.05] 0.24 [0.05] [0.06] 0.12 [0.11] [0.07] -0.13 T=1 0.21 0.18 [0.07]* 0.28 0.21 [0.12]** 0.11 0.19 [0.10] 0.26 0.05 [0.16] [0.03] [0.03] [0.06] [0.04] [0.04] [0.05] [0.07] [0.06] Education expenditure (thousands of 2012 Bs. a month) T=0 0.06 0.06 0.07 0.06 0.05 0.08 0.05 0.03 [0.01] [0.01] -0.02 [0.01] [0.01] -0.01 [0.01] [0.03] -0.03 [0.01] [0.01] -0.01 T=1 0.06 0.05 [0.02] 0.06 0.05 [0.02] 0.06 0.05 [0.04] 0.05 0.03 [0.01] [0.00] [0.00] [0.01] [0.01] [0.01] [0.01] [0.01] [0.00] Health expenditure (thousands of 2012 Bs. a month) T=0 0.02 0.02 0.02 0.02 0.02 0.02 0.01 0.02 [0.00] [0.00] 0.00 [0.00] [0.00] -0.01 [0.00] [0.00] 0.02 [0.00] [0.01] -0.01 T=1 0.03 0.03 [0.01] 0.03 0.03 [0.01] 0.03 0.04 [0.01] 0.02 0.02 [0.01] [0.01] [0.01] [0.01] [0.01] [0.01] [0.01] [0.00] [0.00] Expenditure on durables (last year) (thousands of 2012 Bs. a month) T=0 0.04 0.04 0.05 0.04 0.03 0.03 0.05 0.02 [0.01] [0.01] -0.01 [0.01] [0.01] -0.01 [0.00] [0.01] -0.01 [0.02] [0.01] -0.00 T=1 0.06 0.05 [0.01] 0.06 0.06 [0.02] 0.05 0.04 [0.02] 0.06 0.03 [0.03] [0.01] [0.01] [0.01] [0.01] [0.01] [0.01] [0.01] [0.01] Dwelling investments (thousands of 2012 Bs. of 2012 a month) T=0 0.02 0.03 0.03 0.02 0.01 0.06 0.01 0.01 [0.00] [0.02] -0.02 [0.01] [0.01] -0.01 [0.00] [0.04] -0.04 [0.00] [0.00] -0.02 T=1 0.03 0.02 [0.02] 0.03 0.01 [0.02] 0.01 0.02 [0.04] 0.04 0.02 [0.02] [0.01] [0.00] [0.01] [0.00] [0.00] [0.00] [0.02] [0.01] Note: Standard Errors in brackets. IAI=in age interval. Deflated with CPI base December 2012
  13. 13. Motivation Renta Dignidad Data and Methods Effects Summarizing. . . Data Individual outcomes (means) Bolivia Men Women [55, 60) [60, 64) DID [55, 60) [60, 64) DID [55, 60) [60, 64) DID Participation T=0 0.80 0.74 0.92 0.82 0.69 0.66 [0.01] [0.01] -0.04 [0.01] [0.02] 0.02 [0.02] [0.02] -0.10 T=1 0.85 0.75 [0.02]* 0.96 0.88 [0.02] 0.74 0.62 [0.03]*** [0.01] [0.01] [0.01] [0.01] [0.01] [0.02] Family worker T=0 0.13 0.16 0.02 0.03 0.23 0.27 [0.01] [0.01] -0.01 [0.01] [0.01] -0.01 [0.02] [0.02] -0.02 T=1 0.13 0.14 [0.02] 0.02 0.02 [0.01] 0.23 0.25 [0.03] [0.01] [0.01] [0.00] [0.00] [0.01] [0.02] Informal n/salaried T=0 0.45 0.45 0.57 0.62 0.34 0.31 [0.01] [0.01] -0.02 [0.02] [0.02] -0.02 [0.02] [0.02] -0.03 T=1 0.49 0.47 [0.03] 0.61 0.64 [0.04] 0.37 0.30 [0.03] [0.01] [0.01] [0.02] [0.02] [0.02] [0.02] Informal salaried T=0 0.10 0.07 0.17 0.10 0.04 0.05 [0.01] [0.01] -0.01 [0.01] [0.01] 0.02 [0.01] [0.01] -0.03 T=1 0.10 0.07 [0.01] 0.16 0.11 [0.03] 0.05 0.03 [0.01]** [0.01] [0.01] [0.01] [0.01] [0.01] [0.01] Formal salaried T=0 0.10 0.04 0.15 0.07 0.06 0.02 [0.01] [0.01] 0.00 [0.01] [0.01] 0.02 [0.01] [0.01] -0.02 T=1 0.12 0.07 [0.01] 0.16 0.11 [0.02] 0.09 0.03 [0.02] [0.01] [0.01] [0.01] [0.01] [0.01] [0.01] Note: Standard Errors in brackets.
  14. 14. Motivation Renta Dignidad Data and Methods Effects Summarizing. . . Data Individual outcomes (means) Bolivia Men Women [55, 60) [60, 64) DID [55, 60) [60, 64) DID [55, 60) [60, 64) DID Labor supply intensity-all jobs (hours p/week) T=0 38.14 34.51 45.65 40.55 31.53 29.03 [0.72] [0.82] -1.43 [0.88] [1.16] 0.27 [1.05] [1.11] -3.07 T=1 39.77 34.71 [1.43] 47.42 42.59 [1.86] 32.55 26.98 [2.03] [0.60] [0.71] [0.70] [0.91] [0.89] [0.99] Labor supply-PA (hours p/week) T=0 36.38 33.07 43.62 38.89 30.03 27.80 [0.70] [0.80] -1.49 [0.87] [1.12] 0.37 [1.01] [1.08] -3.28 T=1 38.06 33.26 [1.39] 45.19 40.83 [1.80] 31.32 25.83 [1.97]* [0.58] [0.68] [0.69] [0.87] [0.87] [0.96] Wage-all jobs (2012 Bs. p/hour) T=0 7.61 5.07 11.57 7.58 4.14 2.80 [0.57] [0.38] -0.23 [1.10] [0.66] 1.32 [0.40] [0.37] -1.65 T=1 8.55 5.78 [0.83] 11.60 8.93 [1.48] 5.67 2.68 [0.76]** [0.34] [0.33] [0.51] [0.55] [0.42] [0.32] Labor income-all jobs (thousands of 2012 Bs. p/month) T=0 1.36 0.88 2.16 1.38 0.65 0.43 [0.08] [0.06] -0.03 [0.14] [0.11] 0.27 [0.06] [0.06] -0.31 T=1 1.51 1.01 [0.13] 2.15 1.64 [0.23] 0.92 0.39 [0.12]** [0.06] [0.06] [0.09] [0.10] [0.08] [0.04] Note: Standard Errors in brackets.
  15. 15. Motivation Renta Dignidad Data and Methods Effects Summarizing. . . Methods Standard difference-in-differences (linear) Let Gi = 0, 1; Ti = 0, 1 and Ii denote the treatment defined as: Ii = 1 if Gi = 1,Ti = 1 0 otherwise estimate: Yi =
  16. 16. 0 +
  17. 17. 1Gi +
  18. 18. 2Ti + DIDIi + i (1) to calculate the impact as: DID = [E[Y |G = 1,T = 1] − E[Y |G = 1,T = 0]] −[E[Y |G = 0,T = 1] − E[Y |G = 0,T = 0]] DID is a valid method of identification, although. . . functional form dependency. heterogeneity in the effect of treatment. not possible to estimate effect of the treatment on the control.
  19. 19. Motivation Renta Dignidad Data and Methods Effects Summarizing. . . Methods Changes-in-Changes (Athey and Imbens (2002, 2006a, 2006b)) Baseline model: 1. Y (0) = h(U,T): outcome with no treatment depends on an unknown function h, unobservables u and time t, hence all differences across groups are due to different unobservables u and the production function h does not vary with group. 2. U ? T|G: distribution of U does not vary over time within a group 3. h(u, t) is monotone in u. can be relaxed in the case of discrete (binary) outcomes 4. the support of U|G = 1 is a subset of the support of U|G = 0 analogous DID common trend assumption
  20. 20. Motivation Renta Dignidad Data and Methods Effects Summarizing. . . Methods . . . then AI show that it is possible to identify the distribution of Y (0)|G = 1,T = 1: FY(0),11(y) = FY,10

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