Association for Public Policy Analysis & Management

Barrientos, A.[*], Dietrich, S.[†], Gassmann, F. ⁺ , Kavuma, S.[‡],  Malerba, D.^*, Matuvo, F.^‡, S., Tyrivani, N.+

Abstract

In developing countries a large array of experimental and non-experimental evidence shows that improved education and health outcomes can unleash positive long term developments (Glewwe and Kremer 2006; Glewwe and Miguel 2007; Psacharopoulos 1985, 1994; Psacharopoulos and Patrinos 2004; Strauss and Thomas 2007). Thus, in addition to the important intrinsic values of health and education, there is a large and significant economic potential to be gained by encouraging investments in these human capital aspects. Despite large returns, liquidity constraints can hinder the human capital investments of many poor households (Kremer, Brannen, and Glennerster 2013). Social cash transfer programs have become a widespread instrument to alleviate the financial burden that could constrain households in their decision to send their children to school. However, in spite of promising evidence on its transformational capacity many policy makers around the world still regard social protection as a cost rather than an investment in the future.

This paper assesses the short- and mid-term returns to social protection programs in Uganda. More precisely, we examine ex-ante how the roll-out of two piloted social cash transfer programs could generate returns to increased education attainment through household investments in education and child health. As investments in education require time to generate economic returns, we apply a micro-simulation model to assess the potential effects within a time frame of 10 years. Therefore we estimate the links between income, child health, and schooling decisions and quantify the returns to higher school attainments using nationally representative panel data. Thereafter we simulate how the two social protection programs could generate income returns through direct (transfers) and indirect (transfer induced human capital investments) benefits.

The results suggest positive program effects on child underweight at age 4 and increasing school attainments over time. After 10 years the simulation model predicts a decrease of 1.5 percentage points in child underweight and an increase in school attainments of 0.01 years of schooling compared with a scenario without the programs. Despite positive returns to education, the program costs still exceed these indirect benefits after 10 periods leading to negative rates of return.

Given Uganda’s significant efforts in promoting education for all, the results could indicate that there is little additional scope for the analysed programs to increase school enrolments. However, the estimation results on the income effects at higher education levels are much stronger showing that the cash transfer programs could increase secondary education enrolment.