A methodology for local economy-wide impact evaluation (LEWIE) of cash transfers

A methodology for local economy-wide impact evaluation (LEWIE) of cash transfers

Methodological guidelines for the From Protection to Production (PtoP) project

Year of publication 2013

Product type Document

Edition 1

Synopsis (short abstract) The From Protection to Production (PtoP) project aims to identify productive impacts of cash transfer programmes covering three thematic areas of inquiry: household economic decision-making, the local economy and social networks and risk sharing. The local economy-wide impact evaluation (LEWIE) methodology is designed to understand the full impact of cash transfers on local economies, including on the production activities of both beneficiary and non-beneficiary groups; how these effects change when programs are scaled up to larger regions; and why these effects happen. All of these aspects are important for designing projects and explaining their likely impacts to governments and other sponsoring agencies.

Language English

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Local Economy-wide Impact Evaluation (LEWIE) of Malawi’s Social Cash Transfer (SCT) Programme 2015

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The Government of Malawi’s (GoM’s) Social Cash Transfer (SCT) Program is an unconditional cash transfer program targeted to ultra-poor, labor constrained households. The objectives of the programme include reducing poverty and hunger in vulnerable households and increasing school enrolment. The program began as a pilot in Mchinji district in 2006. Since 2009, the program has expanded to reach an additional eight districts (Chitipa, Likoma, Machinga, Mangochi, Phalombe, Salima, Thyolo and Balaka) out of 28 total districts in Malawi. The program has gone to full scale in Mchinji, Chitipa and Likoma and by 2012, had reached nearly 30,000 households and approximately 103 000 individuals. The SCT provides a significant infusion of cash into Malawi’s rural economy. When beneficiaries spend the cash transfer, they transmit the impact to others inside and outside the local economy, creating benefits for non-recipient households as well, who often provide the goods and services purchased by be neficiary households. The impact on the local economy was simulated using a LEWIE (Local Economy Wide Impact Evaluation) model. This study finds that the Malawi SCT generates a total income multiplier of 1.25 in nominal terms. Each Mk of transfer generates an additional Mk 0.25 of total income gain within the programme area. That is, each Mk of transfer generates an additional Mk 0.25 of total income gain within the project area. In addition, it creates a gain of Mk 0.68 for trading centres d irectly, because households spend a large share of their incomes there, and indirectly, because retail, service and other production activities taking place in the Village Cluster buy a large share of their inputs there. The SCT programme has significant production impacts. The transfers stimulate the production of crops by Mk 0.31 and livestock by Mk 0.14 per Mk transferred. The largest effect is on the retail sector, where sales increase by Mk 0.60 per Mk transferred to eligible households. M ost of this extra income accrues to non-beneficiary households, who are better off and tend to own more of the local businesses.
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Local Economy-wide Impact Evaluation (LEWIE) of Ethiopia’s social cash transfer pilot programme 2014

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The Ethiopia Social Cash Transfer Pilot Programme (SCTPP) was introduced in 2011 in two woredas of the Tigray region by the regional Government with the support of the United Nations Children’s Fund (UNICEF). The goal of the SCTPP is to “improve the quality of life for vulnerable children, the elderly, and persons with disabilities” in programme households. Although the programme targets the poorest of the poor, the actual benefit to the local economy goes beyond programme beneficiaries. When b eneficiaries spend the cash transfer, they transmit the impact of the programme to others inside and outside the local economy, more often to households not eligible for the cash transfer who tend to own most of the productive assets. The impact of the SCTPP on the local economy was simulated using a LEWIE (Local Economy Wide Impact Evaluation) model applied to the two areas that received the transfer, the tabias of Hintalo-Wajirat and the town of Abi-Adi. The LEWIE model found that each birr d istributed in Hintalo-Wajirat generated an extra 1.52 birr via local market linkages, for a total income multiplier of 2.52. Similarly, each birr distributed in Abi-Adi generated an additional .35 birr, for a total income multiplier of 1.35. Thus the initial transfer of 5.58 million birr in Hintalo-Wajirat and 1.62 million birr in Abi-Adi potentially generated 14.06 million birr and 2.19 million birr respectively. However if credit, capital and other market constraints limit the local supply res ponse, the increase in demand brought about by the cash transfer programme may also lead to increased prices and consequently a lower income multiplier. Simulations incorporating such constraints find a “real” income multiplier of 1.84 birr for Hintalo-Wajirat and 1.26 birr for Abi-Adi. In both cases non-beneficiaries and the local economy as a whole benefit significantly from cash transfer programmes via trade and production linkages. Maximizing the income multiplier may require complementary interventions that target both beneficiary and non-beneficiary families.
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Local Economy-wide Impact Evaluation (LEWIE) of Ghana’s Livelihood Empowerment Against Poverty (LEAP) programme 2014

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The Livelihood Empowerment Against Poverty (LEAP) programme provides cash and health insurance to extremely poor households with the goal of alleviating short-term poverty and encouraging long-term human capital development. The LEAP provides a significant infusion of cash into Ghana’s rural economy. When beneficiaries spend the cash transfer they transmit the impact to others inside and outside the local economy, more often to households not eligible for the cash transfer who tend to own most o f the local businesses. The impact on the local economy was simulated using a LEWIE (Local Economy Wide Impact Evaluation) model, focusing on the communities in seven districts included in the LEAP impact evaluation. The LEWIE model for the LEAP programme found that the transfers could lead to relatively large income multipliers of GHS 2.50. That is, every cedi transferred to poor households had the potential to raise local income by GHS 2.50. Eligible households receive the direct benefit of th e transfer while ineligible households the bulk of the indirect benefit. However, if labour, capital and land markets do not function well, upward pressure on prices could result. This would raise consumption costs for all households and lead to a real income multiplier as low as GHS 1.50. Complementary programmes that increase the supply response (such as access to credit to invest in capital) could increase the real-income and production impacts of the programme.

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