Psychology, Skills, or Cash ? Evidence on Complementary Investments for Anti-Poverty Programs

Megan Elizabeth Lang, Edward Soule and Catherine H. Tinsley

No 10503, Policy Research Working Paper Series from The World Bank

Abstract: Growing evidence on the links between poverty and psychology has prompted in creased interest in the psychosocial impacts of economic interventions and the economic impacts of psychologically motivated interventions. In practice, psychologically motivated programs typically comprise one of many components in multifaceted poverty alleviation programs. This paper asks, what are the benefits of allocating complementary, marginal investments in anti-poverty programs towards skills development or psychologically-targeted interventions versus direct economic assistance The paper benchmarks two program-based investments against an unconditional cash transfer by randomly assigning participants in an existing anti-poverty program to one of three groups. The first is psychologically-targeted. It focuses on promoting self-confidence, sense of value and self-worth, and perceived social status. The second targets specific skills: goal setting, public speaking, and networking. Both program-based investments cost around USD \$35 per participant, motivating a benchmark, cost-equivalent unconditional cash transfer. The findings show that the psychologically-targeted intervention significantly improves psychosocial outcomes but shows no economic gains relative to cash, while the skills-based program improves economic outcomes with few effects on psychosocial outcomes. The results illustrate that low-cost psychologically-targeted and skills-based interventions can be effective marginal investments relative to a small cash transfer, but their benefits may accrue in different domains.

Date: 2023-06-26
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