Safety nets are noncontributory transfer programs targeted to the poor or vulnerable. They play important roles in social policy. Safety nets redistribute income, thereby immediately reducing poverty and inequality; they enable households to invest in the human capital of their children and in the livelihoods of their earners; they help households manage risk, both ex ante and ex post; and they allow governments to implement macroeconomic or sectoral reforms that support efficiency and growth.

To be effective, safety nets must not only be well intended, but also well designed and well implemented. A good safety net system and its programs are tailored to country circumstances, adequate in their coverage and generosity, equitable, cost-effective, incentive compatible, and sustainable. Good safety nets are also dynamic and change over time as the economy changes or as management problems are solved and new standards are set.

Drawing on a wealth of research, policy, and operational documents from both academia and the World Bank's work in over 100 countries, For Protection and Promotion provides pragmatic and informed guidance on how to design and implement safety nets, including useful information on how to define eligibility and select beneficiaries, set and pay benefits, and monitor and evaluate programs and systems.

The book synthesizes the literature to date and enriches it with new examples on various program options—cash transfers (conditional and unconditional), in-kind transfers, price subsidies, fee waivers, and public works. It concludes with a comprehensive diagnostic for fitting safety net systems and programs to specific circumstances.

INTRODUCTION
All countries fund safety net programs for the protection of their people. Though an increasing number of safety net programs are extremely well thought out, adroitly implemented, and demonstrably effective, many others are not. This book aims to assist those concerned with social policy to understand why countries need social assistance, what kind of safety programs will serve them best and how to develop such programs for maximum effectiveness.

1.1 How Do Safety Nets Contribute to Development Policy?
Safety nets are part of a broader poverty reduction strategy—interacting with and working alongside of social insurance; health, education, and financial services; the provision of utilities and roads; and other policies aimed at reducing poverty and managing risk. ...

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Margaret Grosh, Carlo del Ninno, Emil Tesliuc, and Azedine Ouerghi
with the assistance of Annamaria Milazzo and Christine Weigand

2008 The International Bank for Reconstruction and Development /Th e World Bank
1818 H Street NW
Washington DC 20433
Telephone: 202-473-1000
Internet: www.worldbank.org

IISBN-13: 978-0-8213-7581-5
eISBN: 13: 978-0-8213-7582-2
DOI: 10.1596/978-0-8213/7581-5

Glossary
Absolute poverty lines. Poverty lines anchored in some absolute standard of what households should be able to count on in order to meet their basic needs. For monetary measures, these absolute poverty lines are often based on estimates of the cost of basic food needs, that is, the cost of a nutritional basket considered minimal for the health of a typical family, to which a provision is added for nonfood needs.

Active labor market programs (or labor activation programs). Programs aimed at increasing the skills, employment, and long-run earning potential of participants through training, apprenticeships, job search assistance, subsidized job placements, and the like.

Adequacy. A program is adequate if it provides sufficient benefits to enough people for long enough. Information on which to judge adequacy is usually provided in positive rather than normative terms—the transfer as a share of income of the recipients, the share of recipients in the population or among the poor, and so on.

Administrative costs. All the costs required to deliver the transfers (and, in some cases, other related services). These activities include the identification of target population receiving and processing applications, dealing with appeals, processing payments, undertaking monitoring and evaluation, and exercising oversight over how program resources are used.

Administrative costs of targeting. Costs to the program of gathering information to help make the decision about who should be admitted. These costs are part of the total administrative costs of the program and include program staff time to determine eligibility and verify reported levels of in come as well as systems for registration procedures andapplicant databases.

Cash transfer programs. Programs that transfer cash to eligible people or households. Common variants include child allowances, social pensions, needs-based transfers, and conditional cash transfers.

Categorical targeting. A targeting method in which all individuals in a specific category (for example, a particular age group, geographic location, gender, or demographic composition) are eligible to receive benefits.

Chronic poverty. Poverty that endures year after year, usually as a result of long-term structural factors faced by the household, such as low assets or location in a poor area remote from thriving markets and services.

Community-based targeting. A targeting method in which a group of community members or leaders (whose principal functions in the community are not related to the transfer program) decide who in the community should benefit.

Comparison of means. Method of estimating program impact using an experimental design that randomly allocates eligible applicants to treatment and control groups. The program’s impact on the outcome being evaluated can be measured by the difference between the mean outcomes of the samples of the treatment group and the control group. This method uses observations at one point in time and therefore assumes that the outcomesof the treatment and control groups evolve in a similar way.

Coping strategies. The subset of risk management strategies designed to relieve the impact of risk once a shock has occurred. The main forms of coping with shocks that decrease income consist of individuals using their savings and selling assets, borrowing, or relying on public or private transfers to maintain current consumption.

Conditional cash transfers. Provide money to poor families contingent on them making investments in human capital, such as keeping their children in school or taking them to health centers on a regular basis.

Cost-benefit analysis. Compares the value of a program’s net impacts on final outcomes, expressed in monetary terms, with the extra costs associated with implementing the program, also expressed in monetary terms.

Cost-effectiveness. Estimates the costs in monetary terms required to obtain a change in final outcomes expressed in quantitative nonmonetary terms, for example the cost of lowering the poverty gap by one point. Such analysis is used in lieu of cost-benefit analysis when outcomes cannot be valued well in monetary terms.

Countercyclical financing. Cases where funding for a program increases when gross domestic product decreases and vice versa.

Covariate shock. An uncertain (in realization, timing, or magnitude) event that affects many or all members of a group or community, such as drought, earthquake, or macroeconomic crisis.

Decile. One-tenth of an ordered population; for example, the poorest or richest one-tenth of the population. See quantile.

Demographic targeting. A targeting method in which eligibility is based on age.

Dependency ratio. The ratio of non-income-earning (or dependent) to income-earning members in the household.

Disability. A physical, mental, or psychological condition that limits a person’s activities. The social model of disability emphasizes people’s ability to function in their particular physical and social environment. Disability therefore arises when barriers prevent people with functional limitations caused by age, disease, injury, or other causes from participating fully in society.

Double difference or difference-in-differences method. Method of estimating program impact by comparing the outcomes for the treatment and comparison groups before (first difference) and after (second difference) the intervention.

Dynamic targeting assessment (or dynamic incidence). Ranks households not by current welfare but by changes in welfare in a recent period. It can therefore be used to describe whether a program is reaching those most severely affected by an economic shock. It requires panel data.

Economically active population. Synonymous with the labor force; includes both the employed and the unemployed.

Equity. Concept of fairness in economics. Equity analysis examines the distribution of benefits across pertinent groups (poor/nonpoor, men/women, rural/urban, and so on). Horizontal equity requires that the same benefits or taxes apply to individuals or households that are equal in all important respects. Vertical equity implies that benefits or taxes are differentiated by ability to pay or need.

Error of exclusion. The exclusion of a person who meets eligibility criteria from a program.

Error of inclusion. The inclusion of a ineligible person in a program.

Evaluation designs. Methods used to select the counterfactual or control group for impact evaluations. They can be broadly classified into three categories: experimental (randomized) design, quasi-experimental design, and nonexperimental design.

Experimental (randomized) design. Impact evaluation design that involves gathering a set of individuals (or other unit of analysis) equally eligible and willing to participate in a program and randomly dividing them into two groups: those who receive the intervention (treatment group) and those from whom the intervention is withheld (control group).

Experimental designs are generally considered the most robust of evaluation methodologies.

Family allowance. Cash transfer for families with children. Family allowances can take various forms, such as means-tested child benefits, birth grants, or universal transfers for all children under a fixed age.

Fee exemption. Exemption granted to everyone for a defined class of service, for example, vaccination or prenatal care.

Fee waivers and scholarships for schooling. Also known as stipends (usually paid in cash to households), education vouchers (coupons that households use to purchase education or inputs to education), targeted bursaries, and interventions related to tuition and textbooks. All such mechanisms are meant to assist households in meeting the costs of schooling.

Fee waivers for health. Waivers granted to individuals based on their personal characteristics (such as poverty), relieving them of the need to pay for health services for which charges usually apply.

Food insecurity. Lack of access to enough food for an active, healthy life. Chronic food insecurity refers to the persistence of this situation over time, even in the absence of idiosyncratic or covariate shocks.

Food stamps, coupons, or vouchers. See near cash transfers.

Food rations. In-kind food transfers intended to provide access to rationed quantities of food to vulnerable and food-insecure households.

Food transfers. See in-kind food transfers.

General subsidies. Measures aimed at controlling the prices of food and other essential commodities or services.

Generosity. The level of a program benefit as a share of the poverty line or other type of indicator, such as the minimum wage, the average wage, or the total consumption of ben eficiary households.

Geographic targeting. A targeting method in which location determines eligibility for benefits or allocates budget to concentrate resources on poorer areas.

Idiosyncratic shock. An uncertain (in realization, timing, or magnitude) event that affects one individual or household, such as illness or the loss of a job.

Impact evaluation survey. Covers a representative sample of program beneficiaries—the treatment group—as well as a control group that ideally is similar in all respects to the treatment group except that its members are not program beneficiaries. Impact evaluation surveys are not representative of the total population.

Incentive compatibility. Implies that a program reinforces certain behaviors considered virtuous by a society. For example, it does not encourage recipients to work or save less, but instead encourages them to invest in schooling, nutrition, and health care.

In-kind food transfers. Provide additional resources to households by making food available when they need it most in the form of food rations, supplementary and school feeding programs, or emergency food distribution.

Incentive (or indirect) costs of targeting. Costs that arise when eligibility criteria induce households to change their behavior in an attempt to become beneficiaries.

Income elasticity. Measures the responsiveness of the quantity demanded of a good to the change in the income of the people demanding the good. Income elasticity is calculated as the ratio of the percentage change in quantity demanded to the percentage change in income.

Income gap. Ratio between the average welfare level of the poor and the poverty lineamong the poor. For example, if the welfare level is measured as per capita consumption, an income gap of 25 percent means that the average per capita consumption of the poor is 25 percent below the poverty line.

Inferior goods or commodities. Goods that have negative income elasticities; thus, the quantity demanded falls as incomes rise.

Informal transfers. See private transfers.

Inframarginal. The amount of a commodity transferred or made available at a subsidized price that is smaller than the amount that consumers would have chosen to purchase at the regular price.

Input indicators. Numerical measurements of the resources (such as staff and financing) used to provide program activities, tracked by the monitoring system.

Instrumental variables. Variables used in nonexperimental design program impact estimates to control for selection bias. These variables determine program participation but do not affect outcomes.

Labor disincentives. Features of program design that discourage labor effort by potential beneficiaries (who may reduce work effort in order to qualify for a benefit) or actual beneficiaries (who may choose a different combination of labor and leisure once they have income from the program benefit).

Last resort programs. Needs-based, usually means-tested, programs designed to help those who are not assisted, or not assisted enough to prevent poverty, by social insurance (pensions, unemployment insurance) or universal programs (child allowances, education, and the like).

Leakage. In discussions of targeting, the leakage rate is the proportion of those who are reached by the program who are classified as nonpoor (errors of inclusion). In discussions of accountability, the term is often used more broadly to include funds that, through various forms of negligence or malfeasance, are diverted from legitimate (though possibly nonpoor) beneficiaries to other uses.

Living standards measurement surveys (or multitopic household surveys). Multisubject, integrated surveys that gather data on a number of aspects of living standards to inform policy. The surveys cover spending, household composition, education, health, employment, fertility, nutrition, savings, agricultural activities, and other sources of income.

Management information system (MIS). Includes all the databases kept by the various program units in the performance of their functions—registry of beneficiaries, payments, and so on.

Means test. A targeting method based on income that seeks to collect comprehensive information on household income and/or wealth and verifies the information collected against independent sources.

Merit good. A commodity that society or policy makers think individuals should have on the basis of a norm other than respecting consumer preferences; education is a broad example of such a good, milk a narrower one.

Mitigation strategies. Risk management strategies implemented by individuals or households before a risk event occurs aimed at reducing the impact of a future risky event. For example, households may contribute to informal or formal insurance mechanisms that will help cover the cost of losses in the event of drought or flood.

Monitoring indicators. Numerical measurements of program inputs, processes, outputs, and outcomes typically expressed as levels (for example, the number of beneficiaries in the program as of a specific date), proportions (for instance, the percentage of beneficiaries paid on time), or ratios (such as the number of sessions held per amount spent). These indicators are tracked by the monitoring system.

Monitoring system. An essential management tool that regularly supplies information about how well a program is working so that program managers can take action to improve its implementation. Monitoring is a continuous process that takes place throughout a program’s life.

Moral hazard. The prospect that people insulated from risk may behave differently from the way they would behave if they were fully exposed to the risk. For example, a person receiving unemployment insurance might search less strenuously for a job because the negative consequences of being uninsured are (partially) borne by the insurance.

Multivariate regression. A statistical technique used for the modeling and analysis of numerical data consisting of values of a dependent (response) variable and one or more independent (explanatory) variables.

Near cash transfers. Include food stamps, coupons, or vouchers that may be used by households to purchase food at authorized retail locations. These instruments can nominally or actually restrict recipients’ choices to certain types of commodities but effectively alleviate the budget constraint in fungible ways.

Needs-based social assistance. Provide transfers for poor populations based on need.

Noncontributory pensions (or social pensions). Benefits paid to the elderly from taxfinanced (rather than contribution-financed) sources and without regard to past participation in the labor market.

Nonexperimental design. A design for impact evaluation that uses multivariate statistical methods to account for differences between program beneficiaries and others.

Orphans and vulnerable children. Orphans (children who have lost one or both parents) and other groups of children who are more exposed to risks than their peers such as children with HIV and those with sick caregivers, street children, children in institutions, child soldiers, child prostitutes, and others who are not cared for in a family setting or who are involved in the worst forms of child labor.

Point-of-service (or point-of-sale) (POS) machines. Communication devices that do not contain any money, but have the capability of authorizing financial transactions carried out in retail stores, restaurants, hotels, or mobile locations.

Political costs of targeting. The costs arising if the degree of targeting negatively affects the program’s budget.

Poverty analysis. Provides information on the level, severity, and depth of poverty; describes the characteristics of the poor; and identifies the factors associated with poverty.

When repeated over time, poverty analysis depicts the trends, duration, and dynamics of poverty among particular groups.

Poverty and social impact analysis. Examination of the distributional impact of policy reforms on the well-being and welfare of various stakeholder groups, particularly the poor and vulnerable.

Poverty gap. The mean difference between the poverty line and household income divided by the poverty line (the nonpoor have a gap of zero) calculated over the whole population. The income gap multiplied by the headcount equals the poverty gap.

Poverty lines. Cutoff points separating the poor from the nonpoor. They can be monetary (for example, a certain level of consumption) or nonmonetary (for instance, a certain level of literacy). The use of multiple lines can help in distinguishing among different levels of poverty. Also see absolute poverty lines and relative poverty lines.

Prevention strategies. Subset of risk management strategies implemented by individuals or households before a risk event occurs to lessen the likelihood of an occurrence.

Price elasticity. Measures the responsiveness of the quantity demanded of a good to the changes in its price.

Private transfers. Transfers or exchanges between households of cash, food, clothing, informal loans, and assistance with work or child care.

Private costs of targeting. The costs to an applicant of applying for a program, including the time or cash costs of collecting the necessary information, traveling to the registration site and queuing for registration, complying with any preconditions, and so on.

Process evaluation. Also known as formative evaluation, implementation research, implementation analysis, or descriptive evaluation. Process evaluation documents, assesses, and explains how a program is being implemented.

Program evaluation. An external assessment of program effectiveness that uses specialized methods to determine whether a program meets certain standards, to estimate its net results or impact, and/or to identify whether the benefits the program generates outweigh its costs to society.

Proxy means test. A targeting method by which a score for applicant households is generated based on fairly easy-to-observe household characteristics, such as the location and quality of the household’s dwelling, ownership of durable goods, demographic structure, education, and so on.

Public works programs (or workfare). Where income support for the poor is given in the form of wages (in either cash or food) in exchange for work effort. These programs typically provide short-term employment at low wages for unskilled and semiskilled workers on labor-intensive projects such as road construction and maintenance, irrigation infrastructure, reforestation, and soil conservation. Generally seen as a means of providing income support to the poor in critical times rather than as a way of getting the unemployed back into the labor market.

Quasi-experimental design. An evaluation design in which a comparison group is constructed using either matching (comparison with a population similar to program participants in terms of their essential characteristics) or reflexive comparison (comparison of the circumstances of program participants before and after their participation in the program).

Quantile. Generic term for equally sized groups of population resulting from ranking from the lowest to the highest on the basis of some characteristic such as household income. The groups resulting from dividing a population into five equally sized groups (each representing 20 percent of the population) are called quintiles; deciles result from division into 10 groups; and percentiles from division into 100 groups.

Quintile. One-fifth of an ordered population; for example, the poorest or richest onetenth of the population. See quantile.

Relative poverty lines. Poverty lines defined in relation to the overall distribution of income or consumption in a country; for example, the poverty line could be set at 50 percent of the country’s mean income or consumption.

Risk and vulnerability analysis. Complements poverty analysis by providing insights into the risks the poor face, as well as the size and characteristics of the population at risk of becoming poor in the event of a shock.

Risk management strategies. Strategies introduced by individuals, households, or communities dealing with risks that may temporarily or permanently affect their well-being. Ex ante strategies look to avoid the risk’s occurrence (prevention strategies) or, if this is not possible, to reduce its impact (mitigation strategies). Ex post strategies are aimed at dealing with the shock once it occurs (coping strategies).

Safety nets. Noncontributory transfer programs targeted in some manner to the poor and those vulnerable to poverty and shocks. Analogous to the U.S. term “welfare” and the European term “social assistance.”

Safety net system. A collection of programs, ideally well-designed and well-implemented, complementing each other as well as complementing other public or social policies.

School feeding programs. In-kind food transfers that provide meals or snacks for children at school to encourage their enrollment and improve their nutritional status and ability to pay attention in class.

Self-targeted programs (or self selection). Self-targeted programs are technically open to everyone, but are designed in such a way that take-up is expected to be much higher among the poor than the nonpoor, or the level of benefits is expected to be higher among the poor.

Shock. See covariate shock and idiosyncratic shock.

Social assistance. See safety nets.

Social costs of targeting. The costs arising when participation in a program carries with it some sort of stigma.

Social funds. Multisectoral programs that provide financing (usually grants) for smallscale public investments targeted at meeting the needs of the poor and vulnerable communities and at contributing to social capital and development at the local level.

Social pensions. See noncontributory pensions.

Social insurance. Contributory programs designed to help households insure themselves against sudden reductions in income. Types of social insurance include publicly provided or mandated insurance against unemployment, old age (pensions), disability, the death of the main provider, and sickness.

Social policy. Public policy dealing with social issues. Social policy aims to improve human welfare and to meet human needs for education, health, housing, and social protection.

Social protection. The set of public interventions aimed at supporting the poorer and more vulnerable members of society, as well as helping individuals, families, and communities manage risk. Social protection includes safety nets (social assistance), social insurance, labor market policies, social funds, and social services.

Social risk management. A framework that can be used to analyze the sources of vulnerability, how society manages risks, and the relative costs and benefits of various public interventions on household welfare. Risk management strategies include prevention, mitigation, and coping and may use government, for profit, or private informal mechanisms. Social safety nets. See safety nets.

Stigma. Negative social labels attached to beneficiaries participating in targeted programs.

Subsidized untargeted sales. Provide universal access to food or other commodities at public distribution centers or designated private outlets on a first-come, first-served basis.

Supplementary feeding programs. In-kind food programs intended to provide food to mothers and young children.

Sustainability. The ability of a program to be continued over a long period.

Target group (or target population). The intended beneficiaries of program benefits.

Targeting. The effort to focus resources among those most in need of them.

Targeting assessment (or benefit incidence analysis). Describes how public spending is distributed across population groups, whether defined as deciles, poor versus nonpoor, geographic areas, ethnic groups, and so on.

Targeting errors. When program eligibility is based on imperfect information, program officials or the targeting rules they use may mistakenly identify nonpoor people as poor or poor people as nonpoor. When the former are admitted to a program, it is an error of inclusion; when the latter are denied access to the program, it is an error of exclusion.

Targeting method. Approach taken to identify the target group and thus determine eligibility for program benefits.

Transient poverty. Poverty among households that are poor in some years but not all.They may be poor in some years due to idiosyncratic or covariate temporary shocks ranging from an illness in the household or the loss of a job to drought or macroeconomic crisis.

Universal, indirect price support for food. Open-ended, untargeted subsidies that aim to lower the price the general population pays for staple foods.

Vulnerability. The likelihood or probability that a household will pass below the defined acceptable threshold of a given indicator and fall into poverty.

Vulnerable groups. Typically including the elderly, orphans, widows, people with disabilities, people with HIV/AIDS, refugees or internally displaced persons, among others.

Vulnerable groups face special difficulties in supporting themselves because of some particular aspect of their situation.

Welfare dependency. See labor disincentives.

Workfare. See public works programs.

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