Demand versus Returns? Pro-Poor Targeting of Business Grants and Vocational Skills Training
Interventions aimed at increasing the income generating capacity of the poor, such as vocational training, micro-finance or business grants, are widespread in the developing world. How to target such interventions is an open question. Many programs...
| Main Authors: | , , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2013
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2013/03/17483338/demand-versus-returns-pro-poor-targeting-business-grants-vocational-skills-training http://hdl.handle.net/10986/13173 |
| Summary: | Interventions aimed at increasing the
income generating capacity of the poor, such as vocational
training, micro-finance or business grants, are widespread
in the developing world. How to target such interventions is
an open question. Many programs are self-targeted, but if
perceived returns differ from actual returns, those
self-selecting to participate may not be those for whom the
program is the most effective. The authors analyze an
unusual experiment with very high take-up of business grants
and vocational skills training, randomly assigned among
nearly all households in selected poor rural communities in
Nicaragua. On average, the interventions resulted in
increased participation in non-agricultural employment and
higher income from related activities. The paper
investigates whether targeting could have resulted in higher
returns by analyzing heterogeneity in impacts by stated
baseline demand, prior participation in non-agricultural
activities, and a wide range of complementary asset
endowments. The results reveal little heterogeneity along
observed baseline characteristics. However, the poorest
households are more likely to enter and have higher profits
in non-agricultural self-employment, while less poor
households assigned to the training have higher
non-agricultural wages. This heterogeneity appears related
to unobserved characteristics that are not revealed by
stated baseline demand, and more difficult to target. In
this context, self-targeting may reduce the
poverty-reduction potential of income generating
interventions, possibly because low aspirations limit the
poor's ex-ante demand for productive interventions
while the interventions have the potential to increase those
aspirations. Overall, targeting productive interventions to
poor households would not have come at the cost of reducing
their effectiveness. By contrast, self-targeting would have
limited poverty reduction by excluding the poorest. |
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