Using household grants to benchmark the cost effectiveness of a USAID workforce readiness program

Abstract

We use a randomized experiment to benchmark a workforce training program to cash transfers in Rwanda. Conducted in a sample of poor and underemployed youth, this study measures the impact of the training program relative not only to a control group, but also to the counterfactual of simply disbursing the cost of the program directly to beneficiaries in cash. The training program was successful in improving a number of core outcomes, including productive hours, assets, savings, and subjective well-being. However, cost-equivalent cash transfers move all these outcomes as well as consumption, income, and wealth. At cost-equivalent levels, cash transfers prove superior across a number of economic outcomes, while training outperforms cash only in the production of business knowledge. Above cost-equivalent levels, we see limited benefits from increasing cash transfer amounts; going from $410 to $750 generates few benefits and an apparent decrease in labor hours. There is a surprising absence of complementarity between human and physical capital interventions, with an arm receiving both interventions doing slightly worse than what we would expect from the independent impacts of each of the two, though given diminishing returns to cash this combined arm outperforms a cash transfer of approximately equal cost. Heterogeneity in impacts and spillover effects are limited, suggesting that the relative impacts of these interventions will be similar across different targeting rules and saturation levels within this population.