Social rate of return

Working Paper 2015-383

Abstract

This study proposes the method of social rate of return (SRR) to evaluate safety net programs such as conditional cash transfer (CCT) schemes. Two types of SRRs are derived in the study: one based on the poverty social welfare function that focuses on the poorest 20% of the population and the other based on the Gini social welfare function that focuses on inequality as measured by Gini. Defined as the social welfare generated by a program as a percentage of the cost of the program, the SRR is used in this study to conduct a comparative evaluation of CCT programs in Brazil ({it Bolsa Familia} Program) and the Philippines ({it Pantawid Pamilyang Pilipino} Program or 4Ps). The findings reveal that the targeting of {it Bolsa Familia} has improved substantially during 2001–2012, with the poor comprising almost two-thirds of the beneficiaries in 2012. Meanwhile, the 4Ps has rapidly expanded to cover 21% of the population in 2013, but at the expense of increased leakage of beneficiaries from 45.33% in 2011 to 52.20% in 2013. The study finds that both programs have become more efficient in alleviating poverty and inequality – albeit {it Bolsa Familia} is deemed more efficient given its better targeting system and lower operational cost. Nevertheless, the 4Ps’ targeting efficiency and administrative costs associated with the delivery of transfers have improved within a short period. The findings also indicate that both programs contribute more to the reduction in poverty than inequality.

Authors: Nanak Kakwani, Hyun H. Son.