TY - JOUR
T1 - Productive effects of public works programs
T2 - What do we know? What should we know?
AU - Gehrke, Esther
AU - Hartwig, Renate
N1 - Funding Information:
The authors would like to thank the editor, Arun Agrawal, two anonymous referees, as well as Tilman Altenburg, Sarah Blank, Markus Loewe, Jean-Philippe Platteau, and Eva Weidnitzer for their helpful comments and suggestions. Funding provided by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) [Grant Number 81175983] is gratefully acknowledged. Renate Hartwig also acknowledges financial support from the Fonds de la Recherche Scientifique (F.R.S.-FNRS) [Registration Number 6335].
Publisher Copyright:
© 2018 Elsevier Ltd
PY - 2018/7
Y1 - 2018/7
N2 - Public Works (PW) programs are popular development interventions due to their potential ‘double dividend’ of transferring income to the poor while at the same time creating public infrastructure. However, PW programs are costly and demanding from an administrative perspective and it is not clear whether they are the most cost-effective intervention to reduce poverty. Therefore, an assessment of PW programs needs to understand which benefits and costs these programs entail relative to other interventions, and whether or not the extra cost can be outweighed by generating benefits over and above those of alternative interventions, such as Cash Transfer programs. This paper seeks to identify these benefits, and develops a conceptual framework that highlights four mechanisms through which PW programs could strengthen the productive capacity of poor households beyond the effects of Cash Transfers: productive investments, labor market effects, skills development, and increases in trade and production. It then reviews available empirical evidence from PW programs in developing countries. The results suggest that PW programs can induce productive investments via income and insurance effects when the program is sufficiently reliable and long-term. PW programs can also have positive welfare effects by raising wages, but potential adverse effects on labor markets have to be taken into account. Implicit or explicit training components of PW programs do not seem to increase the employability or business earnings of participants. Finally, there is only scant empirical evidence on the productive effects of the public infrastructure generated by PW programs, and further research is crucial to understand and quantify those effects. This paper concludes that PW programs are only preferable over alternative interventions if they generate substantial investments among the target group, if there is clear evidence that private-sector wages are below equilibrium wages, or if the public infrastructure generated in PW programs has substantial growth effects.
AB - Public Works (PW) programs are popular development interventions due to their potential ‘double dividend’ of transferring income to the poor while at the same time creating public infrastructure. However, PW programs are costly and demanding from an administrative perspective and it is not clear whether they are the most cost-effective intervention to reduce poverty. Therefore, an assessment of PW programs needs to understand which benefits and costs these programs entail relative to other interventions, and whether or not the extra cost can be outweighed by generating benefits over and above those of alternative interventions, such as Cash Transfer programs. This paper seeks to identify these benefits, and develops a conceptual framework that highlights four mechanisms through which PW programs could strengthen the productive capacity of poor households beyond the effects of Cash Transfers: productive investments, labor market effects, skills development, and increases in trade and production. It then reviews available empirical evidence from PW programs in developing countries. The results suggest that PW programs can induce productive investments via income and insurance effects when the program is sufficiently reliable and long-term. PW programs can also have positive welfare effects by raising wages, but potential adverse effects on labor markets have to be taken into account. Implicit or explicit training components of PW programs do not seem to increase the employability or business earnings of participants. Finally, there is only scant empirical evidence on the productive effects of the public infrastructure generated by PW programs, and further research is crucial to understand and quantify those effects. This paper concludes that PW programs are only preferable over alternative interventions if they generate substantial investments among the target group, if there is clear evidence that private-sector wages are below equilibrium wages, or if the public infrastructure generated in PW programs has substantial growth effects.
KW - Investment
KW - Public goods
KW - Public Works programs
KW - Skills
KW - Wages
UR - http://www.scopus.com/inward/record.url?scp=85044077080&partnerID=8YFLogxK
U2 - 10.1016/j.worlddev.2018.02.031
DO - 10.1016/j.worlddev.2018.02.031
M3 - Review article
AN - SCOPUS:85044077080
SN - 0305-750X
VL - 107
SP - 111
EP - 124
JO - World Development
JF - World Development
ER -