INTERNATIONAL BANK FOR WORLD BANK R E T C N O E N STRUCTION PM AND DEVELO January 2003 No.17 A regular series of notes highlighting recent lessons emerging from the operational and analytical program of the World Bank`s Latin America and Caribbean Region MEXICO'S PROGRESA: INNOVATIVE TARGETING, GENDER FOCUS AND IMPACT ON SOCIAL WELFARE Quentin Wodon, Benedicte de la Briere, Corinne Siaens, and Shlomo Yitzhaki PROGRESA (Programa de Educación, Salud y Alimentación) Founded in 1997, PROGRESA grew to cover around 2.6 is an innovative Mexican program that provides cash transfers million families by the end of 1999, the equivalent of 40 to poor rural households, on condition that their children at- percent of all rural families, and one in nine families nation- tend school and their family visits local health centers regu- ally. Operating in 31 of the 32 states, in 50,000 localities larly. and 2,000 municipalities, its 1999 budget of US$777 million equaled 0.2 percent of Mexico's gross domestic product. Targeted benefits and incentives to invest in The high level of funding for PROGRESA, and reduced funding for other programs, was based on a deliberate health and education policy decision - to favor programs that are better targeted to the poor, which involve co-responsibility by beneficiaries, Confronted with rising poverty after the economic crisis of and which promote long-term behavioral change. 1995, the Mexican government progressively changed its poverty reduction strategy, ending universal tortilla subsi- In education, PROGRESA provides bi-monthly cash transfers dies and instead funding new investment in human capital to households with children in school. The amounts rise with through PROGRESA. The program gives cash grants to grade level, both to compensate for hypothetical lost earnings poor rural households, provided their children attend school from child labor and to improve retention of children at the for 85 percent of school days and the household, visit public secondary level. Monthly transfers in January-June 1999 health clinics and participate in educational workshops on ranged from Mexican Pesos $75 per child in the third grade of health and nutrition. primary school to Mexican Pesos $285 per child in the third year of secondary school. (At the time, one US dollar Objectives of PROGRESA · Improve the conditions of education, health and nutrition of poor families, particularly children and their mothers, by pro- viding: - Sufficient quality services in the areas of education and health, - Monetary assistance; - Nutritional supplements. · Integrate these actions so that educational achievement is not affected by poor health or malnutrition in children and young people, or because they carry out work that makes school attendance difficult · Ensure that households have sufficient resources available so that their children can complete their basic education · Encourage the responsibility and active participation of parents and all family members in improving the education, health and nutrition of children and young people · Promote community participation and support for the actions of PROGRESA, so that educational and health services ben- efit all families in the localities where it operates, as well as uniting and promoting community efforts and initiatives in ac- tions that are similar or complementary to the Program. 1 was worth approximately 10 Pesos). Evaluations in 1998 and household and subtracting the income earned by children. 1999 showed that PROGRESA raised school enrollment rates, This income was compared to a Standard Food Basket to with children from participating households receiving on aver- create a binary variable for poor and non-poor status. In the age 0.64 years of schooling more than others. The evidence second step, a statistical analysis (called discriminant analy- suggests that most of the gains are obtained at the secondary sis) identified the non-income variables that best distinguish level and it may, in fact, make sense to shift some of the poor and non-poor households. A second index, called a resources spent in stipends from primary to secondary educa- "discriminant score" was computed using these variables, tion. In health care, PROGRESA provides free basic health care and used to reclassify households as poor (and therefore eli- to beneficiaries, prenatal care for pregnant women, growth gible to participate in PROGRESA) or non-poor (ineligible). monitoring of babies, nutritional supplements for children, In the third stage, community meetings were held in each lo- monetary grants for purchasing food (Mexican Pesos $115 per cality, for all eligible beneficiaries and local authorities. month in January-June 1999), and education on hygiene, Each community was given the list of program participants, nutrition and reproductive health. However, these benefits and it was still feasible at this stage to change the selection come with conditions, including regular visits to the health if it was believed that some poor families should be reclassi- center, attendance at educational sessions, and helping to fied as non-poor or vice versa. However, the proportion of maintain schools and clinics. Evaluations in 1998 and 1999 households whose selection was disputed was very small found increased attendance at health clinics and reduced mor- (0.1 percent of selected households). bidity among beneficiary children aged 0 to 2 years. PROGRESA's targeting mechanism has been very effective, The maximum total cash grant per household was Mexican but of course it is not perfect. The third stage was intended Pesos $695 per month in January-June 1999. On average, a to make use of communities' knowledge about who are the typical beneficiary household received Mexican Pesos $238, most needy, and thus to improvethe accuracy of targeting which represented 19.5 percent of their using econometric models. In practice, the average monthly consumption levels. third stage has not been used often. More thought may be needed on how commu- A 3-Stage Targeting Mechanism nity participation could enhance the effec- tiveness of targeting. A key feature of PROGRESA is its three- Gender Focus stage targeting mechanism based on com- munity and household characteristics. The first stage selects poor, rural localities to PROGRESA deals with gender in three participate in the program. The second ways: it gives the financial transfers to the stage selects eligible families within partici- female head of household of each partici- pating localities. The third stage involves pating household; the transfers associated local meetings to incorporate eligible fami- with children's school attendance are lies and to check on the selection process, higher for girls than for boys at the sec- allowing for resolution of any disputed ondary school level; and the program's eligibility decisions. health care benefits focus on pregnant and lactating mothers. In selecting localities, data from the 1990 census and the 1995 population count were used to create a Perhaps the most innovative feature of the program is how it "marginality index" for 105,749 localities. The index com- channels financial transfers to women, potentially affecting prises 7 variables for each locality: share of illiterate adults, intra-household decision-making. One study of the outcome share of dwellings without water, share of dwellings without of the program found that, in five out of eight decision-mak- draining systems, share of dwellings without electricity, ing categories, PROGRESA decreased the probability that average number of occupants per room, share of dwellings husbands made decisions alone (i.e., without consulting with dirt floor and share of population working in the primary wives). Also, over time, women became more likely to de- sector. The marginality index was "high" or "very high" for cide by themselves on the use of their extra income from 76,098 localities. The localities ultimately selected as eligible PROGRESA. Results from focus groups showed the had to have a primary school, a secondary school, and a PROGRESA policy has promoted recognition of the contri- clinic, and could not have an extremely small population or bution and role of women in caring for families. In addition, be so isolated that access was limited. These requirements left participation in PROGRESA-related group discussions and 48,501 eligible communities. tasks has developed women's awareness, knowledge, confi- dence and control over their activities and movement. In the second stage of targeting, census data was used in a two-step process to classify households as poor or non-poor. PROGRESA attempts to redress the lower levels of second- The first step involved constructing a per capita income ary school enrollment found among girls in Mexico (67 per- indicator by summing all individual incomes in a given cent compared to 73 percent for boys) by making its 2 schooling-related transfer amounts rise faster for girls than While it is too early to detect behavior changes related to for boys in secondary school. An evaluation found that fertility among PROGRESA beneficiaries, the resulting im- PROGRESA caused increases in secondary school enroll- provement in women's education, in the care of pregnant ment rates ranging from 11 to 14 percentage points for girls women, and the health of infants will likely yield changes in (see Figure 1), and for boys, from 5 to 8 percentage points. birth spacing and reproductive health decisions in the me- Whether or not the program's design changes negative atti- dium to long-run. tudes about girls' education (that it is a waste after primary school, since they will marry anyway, or that girls should be kept home from school to lower the risk of their finding a Impact on Social Welfare boyfriend), it does seem to counteract the consequences of such attitudes. To the extent that greater educational attain- ment by girls can help improve their future status in house- PROGRESA's impact on social welfare has been evaluated holds, there may be some long-term empowerment effects and compared with other social programs in Mexico, taking from PROGRESA. into account both immediate redistribution effects and long- term growth effects. A program's immediate benefits include Figure 1 the new income received by each individual beneficiary (or Enrollment Rates among Girls from Poor Households, 1998 the value of goods or services received), and also the benefit 1 of reduced inequality in society, due to the redistribution of income caused by the program. Changes in inequality are included because individuals assess their own welfare based both on their own absolute income level, and on how this Rate .8 income compares with that of others. The impact of a pro- gram or policy on social welfare can be broken down into two components, income growth (capturing benefits such as ollment Enr higher future wages due to a better education today), and re- .6 distribution. Consider first the growth impact of PROGRESA, and espe- cially its education component. The long term "income mul- .4 Source: IFPRI , 2000a tiplier" effect of the investments in education can be ap- 0 1 2 3 4 5 6 7 8 9 proximated as follows. Consider a boy receiving stipends Grade Completed and other direct benefits for 7 years (grade 3 of primary Non-PROGRESA Localities PROGRESA Localities school to grade 9 of secondary school), at a cost of 13,170 pesos in 1999. If administrative costs are 9 percent of out- Thanks to PROGRESA, pre-natal care visits to health clin- lays, total cost is 14,473 pesos (13,170/0.91). The boy may ics by pregnant mothers have increased by 8 percent in the expect an increase in schooling of 0.64 year attributable to first trimester of pregnancy, which in turn decreased the per- PROGRESA, with a return of 8 percent per additional year centage of first visits in the second and third trimester of of schooling. Assuming the boy migrates to an urban area pregnancy. There is evidence that this behavioral change has upon adulthood and earns an urban wage, and using a dis- had a significant effect on the health of babies and pregnant count rate of 5 percent per year, the net present value of fu- mothers (see Figure 2). ture earning gains is an estimated 102,000 pesos (taking into account the probability of working and the age profile of earnings.) This yields a multiplier of 7 (102,000/14,473). Figure 2 - Daily visits to Public Health Clinics But some boys will remain in rural areas where wages are lower. The estimation also does not account for losses in 16 child labor wages and other costs (e.g., private costs of 14 schooling). For girls, the increase in years of schooling is 12 larger, but labor force participation and thus future wages 10 are lower, while program costs are larger (stipends are Visits 8 higher for girls in secondary school). All in all, a multiplier 6 of 5 for boys and girls taken jointly may be realistic. In 4 other words, an investment in program costs of one peso to- day is probably worth 5 pesos in future discounted benefits. 2 Source: IFPRI, 2000b 0 Consider next the redistributive impact of PROGRESA. 96 96 96v 96 97 r 97 y 97 97 97v 97 98 98 98 98v 98 Jan Mar 96May 96Jul Sep No Jan y 98Jul Ma Ma Jul Sep No Jan Mar Ma Sep No This impact is measured using the program's Gini Income Elasticity (GIE), an estimate of how an increase in funding Non-PROGRESA Localities PROGRESA Localities for the program changes the Gini index of inequality. A GIE of zero means than on average, the distribution of the 3 program benefits is not correlated with income. A negative Taking both the growth impact (our "quick and dirty" multi- (positive) GIE means that the program benefits tend to reach plier of 5) and the redistributive impact of the program into comparatively poorer (richer) households. Estimates based account, the gain in social welfare of spending one peso on on household survey data suggest that the GIE for PROGRESA may be as large as 7.4 pesos (the growth im- PROGRESA is ­0.93, which is lower, and thereby more re- pact times one minus the product of the GIE and the Gini distributive than many other social programs in Mexico, in- index of inequality). In fact, the social welfare gains from cluding PROCAMPO (cash transfers to farmers for 15 years PROGRESA appear to be much higher than the gains from following the implementation of the NAFTA trade agree- several other programs. ment), Liconsa (subsidized milk for poor families), and free tortilla (subsidized tortilla for poor families). Thus, apart ****** from its growth effect (higher future wage earnings thanks to a better education), the program also contributes to redis- tribution today towards the poor who receive schooling sti- pends, resulting in large social welfare gains. Evaluation of PROGRESA Beginning early 1998, the International Food Policy Research Institute (IFPRI) at the request of PROGRESA conducted an evaluation of its major rural anti-poverty program. This series of reports were presented to PROGRESA from November 1998 through November 2000. They are available for download in English and Spanish at this website: http://www.ifpri.org/themes/progresa/progresa_report.htm About the Authors References Quentin Wodon is a Lead Specialist in the Poverty Reduc- T. Paul Schultz (2000a) " School Subsidies for the Poor: tion and Economic Management Unit of the Bank's Africa Evaluating a Mexican Strategy for Reducing Poverty", Region, Benedicte de la Briere, previously at IFPRI, now at IFPRI the Department for International Development, Brazil, Corinne Siaens is a consultant with the Poverty Group in the Gertler, P. J. (2000b). "Final Report: The Impact of Latin America and Caribbean Region, and Shlomo Yitzhaki PROGRESA on Health". November. International Food is consultant and an economist with the Department of Eco- Policy Research Institute, Washington, D.C. nomics, Hebrew University of Jerusalem. Notes Learn more about this program http://www.ifpri.org/themes/progresa.htm This note is based on a paper by the authors entitled http://www.progresa.gob.mx "The Impact of Public Transfers on Inequality and So- cial Welfare: Comparing Mexico's PROGRESA to ...and more about the fight against poverty.. Other Government Programs". The review section of http://www.worldbank.org/poverty/ this note and the background paper is based on evalu- ation reports by IFPRI, available on the web at ....and visit our new Mexico Office Website www.ifpri.org. Benjamin Kahn provided editorial as- sistance for the preparation of this note. http://www.bancomundial.org.mx/ "en breve" might also be of interest to: To Subscribe to "en breve" please send an email to "en_breve@worldbank.org" or write to: Name: Institution: Editor, En breve MSN I6-604 Address: The World Bank 1818 H Street NW Washington D.C. E-mail: 4