Savings and Subsidies, Separately and Together: Decomposing Effects of a Bundled Anti- Poverty Program

Transcription

1 Savings and Subsidies, Separately and Together: Decomposing Effects of a Bundled Anti- Poverty Program Michael Carter, UC Davis Rachid Laajaj, Universidad de los Andes Dean Yang, University of Michigan

2 Millennium Villages Project

3 Fighting poverty with multiple interventions Many anti-poverty programs are bundled, in that they consist of multiple components Millennium Villages implements interventions in food, education, environment, health, etc. Programs to help the ultrapoor (Karlan et al 2015) Resource transfers, skills training, savings, health, etc. But how do the components interact with one another? Are all necessary? Do components complement one another? We investigate this in Manica, Mozambique, looking at the interplay between two important types of programs: Agricultural input subsidies Formal savings

4 Input subsidy programs (ISPs) Perhaps the most significant recent development in agricultural policy in Sub-Saharan Africa Large-scale subsidization of modern inputs (fertilizer, improved seeds) Across 10 countries implementing ISPs, 2011 expenditures totaled $1.05 billion, or 28.6% of public agricultural spending Substantial budgetary support by World Bank, other donors Represents an about-face for many development agencies, which for decades opposed subsidies 4

5 ISP expenditures in 10 SSA countries, % 60% 58,3% Expenditures as % of public agricultural spending 50% 40% 30% 20% 18,1% 25,7% 26,0% 26,1% 29,9% 39,9% 46,0% 10% 8,4% 10,4% 0% Burkina Faso Ethiopia Mali Kenya Nigeria Senegal Ghana Zambia Tanzania Malawi Source: Jayne and Rashid (2013) 5

6 Savings More recently, there has been increased interest in savings interventions in developing countries Provide formal savings facilities to the poor, to complement informal savings Savings match programs have been attempted, mostly in developed countries Experimental studies of savings interventions have not examined their interaction with other programs 6

7 Testing for complementarity Consider two interventions whose impacts when offered separately are a and b, and whose impact when offered together is a + b + c Complementarity represented by c Complementary: impact of the joint intervention is greater than the sum of impacts when offered separately a + b + c > a + b (c > 0) Additive: joint impact is equal to the sum of the separate impacts a + b + c = a + b (c = 0) Substitutes: joint impact is lower than the sum of the separate impacts a + b + c < a + b (c < 0)

8 Key collaborators Provincial Government of Manica Banco Oportunidade de Mocambique (BOM) Food and Agriculture Organization (FAO) European Commission (EC) International Fertilizer Development Corporation 8

9 The study ~1,500 rural maize farmers in 94 localities in Manica province, Mozambique A locality is a grouping of nearby villages Study participants are progressive farmers willing to use modern agricultural inputs Lists generated by government agricultural extension workers in each village 9

10 Randomization of treatments Each locality randomly assigned to one of three savings treatment groups (control, basic savings, matched savings) After stratification into groups of 3 nearby localities Subsidy vouchers assigned by random lottery at participant level within localities prob. 1/3 prob. 1/3 prob. 1/3 No savings program (32 locali;es) Basic savings program (30 locali;es) Matched savings program (32 locali;es) prob. 1/2 prob. 1/2 prob. 1/2 prob. 1/2 prob. 1/2 prob. 1/2 Subsidy No subsidy Subsidy No subsidy Subsidy No subsidy 10

11 Subsidy vouchers 50% of study participants within each village randomly assigned to voucher receipt Provides 73% discount on MZN 3,160 (~US$113) package of fertilizer, improved seeds Voucher redemption rates: Lottery winners: 48.3% Lottery losers: 12.1% Carter, Laajaj, and Yang (2014) examines impact of subsidies alone in no-savings localities Positive impacts on fertilizer use, output, consumption that persist up to two years after the subsidy Learning appears to be a channel, leading to persistence of impact 11

12 BOM s Bancomovil Savings accounts at Banco Oportunidade de Mocambique (BOM) Access via 2 branches and scheduled visits by Bancomovil units 12

13 Study localities, by savings treatment Catandica: - Bancomovil (BOM) - Caixa Financeira - BIM Manica: - Bancomovil (BOM) - Barclays Bank - BOM - BIM - BCI Chimoio: - Tchuma - Standard Bank - Barclays Bank - BOM - BIM - BCI - Socremo - Banco Terra Sussundenga: - Bancomovil (BOM) - Barclays Bank

14 Savings treatments Both savings treatments began with village-level information sessions on formal savings Emphasized use of savings for both investment and selfinsurance Over next two months, one representative per group of 5 study participants receives follow-up training in town, and asked to convey information to group-mates Participants also encouraged to open accounts at BOM, either at Bancomovil or fixed branch locations 14

15 Educational material on savings and fertilizer 15

16 Savings game

17 Basic vs. matched savings Accounts offered in basic savings treatment were standard savings accounts Raises 2013 account ownership at BOM by 16 pp In matched savings treatment: Match is 50% of minimum balance over match period Matching funds capped at MZN 1500 (~$54) Match period: August 1 October 31 Designed with agricultural cycle in mind Match period ends just before next planting season If save full amount (MZN 3000), savings + match can purchase input package sufficient for 3/4 hectare plot Two years of match promised: 2011 and 2012 Raises 2013 account ownership at BOM by 22 pp 17

18 Surveys First survey administered Apr-May 2011 Three follow up surveys, in September of 2011, 2012, and

19 Impact on fertilizer use ( ) 70% 60% 53,9% ** ** 60,5% 59,6% ** % impact on fer]lizer use 50% 40% 30% 20% 46,5% 10% 7,4% 0% Voucher Basic savings Basic savings + voucher Matched savings Matched savings + voucher Significance levels: 1%***, 5%**, and 10%*. Control group has fer]lizer use of MZN 1,242.

20 Impact on formal savings ( ) *** *** Impact on formal savings (MZN) * *** Voucher Basic savings Basic savings + voucher Significance levels: 1%***, 5%**, and 10%*. Control group has formal savings of MZN 1,439. Matched savings Matched savings + voucher

21 Impact on formal savings: BOM vs. other The majority of savings increases are not at BOM, but at other banks (BIM in particular) Impact on formal savings (MZN) Voucher Basic savings Basic savings + voucher Matched savings Matched savings + voucher BOM Other

22 Daily consumption per capita Summary measure of well-being: daily consumption per capita, average across Total value of consumption in household, divided by number of household members, converted to daily frequency Consumption items reported in survey, converted to money values Detailed food items Personal items Transport Utilities Household items Health Education Personal expenditures Taxes Other

23 Impact of treatments on consumption 12% 10% 8,40% ** 9,10% ** 9,90% ** 8,80% ** 8% % impact on consump;on 6% 4% 3,70% 2% 0% Voucher Basic savings Basic savings + voucher Matched savings Matched savings + voucher Significance levels: 1%***, 5%**, and 10%*. Per capita daily consump]on in control group is MZN 72.

24 Impact of treatments on consumption 12% 10% 8% 8,40% ** 9,10% ** 9,90% ** 8,80% ** ** % impact on consump;on 6% 4% 3,70% 2% 0% Voucher Basic savings Basic savings + voucher Matched savings Matched savings + voucher Significance levels: 1%***, 5%**, and 10%*. Per capita daily consump]on in control group is MZN 72.

25 Impact of treatments on consumption 12% 10% 8% 8,40% ** 9,10% ** 9,90% ** 8,80% ** ** % impact on consump;on 6% 4% 3,70% 2% 0% Voucher Basic savings Basic savings + voucher Matched savings Matched savings + voucher Significance levels: 1%***, 5%**, and 10%*. Per capita daily consump]on in control group is MZN 72.

26 Impact of treatments on consumption 12% Cannot reject that all treatment effects are equal For no pair of treatment effects can we reject equality 10% 8,40% ** 9,10% ** 9,90% ** 8,80% ** 8% % impact on consump;on 6% 4% 3,70% 2% 0% Voucher Basic savings Basic savings + voucher Matched savings Matched savings + voucher Significance levels: 1%***, 5%**, and 10%*. Per capita daily consump]on in control group is MZN 72.

27 Substitutes, not complements It appears that subsidies and savings are substitutes, rather than complements at least from the standpoint of raising consumption levels Offering subsidy alone has as much impact as offering savings alone And offering both has no additional impact Why might this be the case?

28 The dual role of savings Savings can serve two roles Investment: funds accumulated and then used productively Risk-management: holding buffer stocks to cope with shocks (self-insurance) Use of savings may depend on whether household receives subsidy or not When not receiving subsidy, households use savings for investment as well as risk-management On the other hand, subsidy recipients may use savings for risk-management alone, and not for additional investment

29 Additional evidence This seems to be what is going on Consumption variance is lower in savings treatment groups Savings treatment groups appear better at coping with shocks

30 Impact of treatments on consumption variance 0,1 0,092 *** 0,08 Impact on standard devia;on of log consump;on 0,06 0,04 0,02 * 0,050 0,027 0,036 0 Voucher Basic savings Basic savings + voucher - 0,006 Matched savings Matched savings + voucher - 0,02 Significance levels: 1%***, 5%**, and 10%*. Consump]on variance in control group is 0.45.

31 Impact of treatments on consumption variance 0,1 0,092 *** 0,08 Impact on standard devia;on of log consump;on 0,06 0,04 0,02 0,050 * 0,027 0,036 0 Voucher Basic savings Basic savings + voucher - 0,006 Matched savings Matched savings + voucher - 0,02 Significance levels: 1%***, 5%**, and 10%*. Consump]on variance in control group is 0.45.

32 Impact of treatments on consumption variance 0,1 0,092 *** 0,08 Impact on standard devia;on of log consump;on 0,06 0,04 0,02 0,050 * 0,027 0,036 0 Voucher Basic savings Basic savings + voucher - 0,006 Matched savings Matched savings + voucher - 0,02 Significance levels: 1%***, 5%**, and 10%*. Consump]on variance in control group is 0.45.

33 PDFs of log consumption

34 Savings helps cope with bad shocks Savings also help households cope with negative agricultural shocks In each survey, respondents report whether the last agricultural season was a bad year Subsidy-only treatment makes household consumption more sensitive to bad years By contrast, in savings treatments, consumption does not fall in bad years

35 In sum From standpoint of raising consumption, subsidies and savings appear to be substitutes, rather than complements Either treatment on its own has similar positive impact, but providing both treatments has no additional impact Savings are used for either investment or risk-management Households receiving both subsidies and savings treatments seem to focus on risk management Households receiving only savings treatments may be using savings for both purposes Underlines how financial services can help households offset increased risk from new economic opportunities Complementarities between development programs may show up in risk management rather than in higher mean returns

36 Heterogeneous effect of subsidies Impact of subsidies in no- savings villages Impact on index of consump;on and assets 0,12 0,1 0,08 0,06 0,04 0,084 ** 0,091 ** Within-village impact of subsidies varies with exposure to savings intervention 0,037 0,099 ** 0,088 ** Impact of subsidy in matched savings villages Impact of subsidy in basic savings villages 0,02 0 Voucher Basic savings Basic savings + voucher Matched savings Matched savings + voucher

37 Other takeaways Estimating impacts of subsidies: Estimated impact of subsidies, within locality, varies according to presence of savings program in locality In no-savings villages, subsidy impacts are large But in savings villages, subsidy impacts disappear Because savings is a substitute for subsidies, from the standpoint of consumption/asset maximization May help explain differences in estimated subsidy impacts across studies (e.g., Duflo et al 2011, Carter et al 2014, Harou et al 2014) Benefit-cost analyses: Basic savings does just as well as relatively costly subsidy and matched savings programs at raising consumption and assets Case for subsidy and matched savings programs on top of basic savings hinges on valuation of risk-reduction benefits