Abstract
Evidence on the effectiveness of workfare as an anti-poverty program in developing countries is weak compared with the relatively well-established role of public works during economic crisis as a social safety net. This paper contributes to evidence building by examining the impact of a large-scale workfare program in Bangladesh, the Employment Generation Program for the Poorest. Taking advantage of the program's distinguishable feature of direct wage transfer to a person's bank account, the paper uses accessibility to local banks as an instrumental variable to identify the program's impacts on rural social assistance beneficiaries. Based on locality-by-time fixed effects models over two rounds of locality panel data, the analysis finds that the Employment Generation Program for the Poorest has contributed to increasing overall household consumption and reducing outstanding loans. In particular, expenditures on quality food and health care have significantly increased, which likely helps individuals continue to engage in income-generating activities in the labor market. However, the implementation costs and poor quality of public assets built through work projects could potentially undermine the program's efficiency. Moreover, further evidence is required on the impacts of work experience through workfare on subsequent labor market outcomes and the value of public assets, to assess the program's effectiveness compared with administratively simpler alternative instruments such as unconditional cash transfers.
Highlights
Public works provide opportunities for short-term employment, during economic shocks
Public works played a positive role in the Republic of Korea during the 1998 Asian financial crisis; in Argentina, the Jefes program, implemented during the 2002 economic crisis is well recognized for mitigating the negative impacts of these crises (See Fallon and Lucas, 2002; Subbarao et al 2012 for a literature review)
Whereas the impacts of public works are relatively well observed during economic crises, a knowledge gap exists pertaining to whether recurrent and perpetual workfare programs achieve their envisaged objectives with effectiveness
Summary
Public works provide opportunities for short-term employment, during economic shocks. The selftargeted feature of public works, where those who are desperately in need of work self-select into the scheme that provides wages lower than a typical market rate with mostly menial jobs, is critical in the effectiveness of public works. It only attracts those lacking employment opportunities and encourages a return to regular work when help is no longer needed, reducing opportunity costs in the labor market and resolving the issue of identification of the deserving poor (Besley and Coate 1992). Whereas the impacts of public works are relatively well observed during economic crises, a knowledge gap exists pertaining to whether recurrent and perpetual workfare programs achieve their envisaged objectives with effectiveness. Unlike public works during economic crises, many individuals can anticipate the seasonality of the labor market and work schedules in recurrent workfare programs; they may substitute existing labor opportunities with workfare, in which case the opportunity costs of the program can be large
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