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Do Public Program Benefits Crowd Out Private Transfers in Developing Countries? A Critical Review of Recent Evidence

Plamen Nikolov and Matthew Bonci ()
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Matthew Bonci: University of Pennsylvania

No 13081, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Precipitated by rapid globalization, rising inequality, population growth, and longevity gains, social protection programs have been on the rise in low- and middle-income countries (LMICs) in the last three decades. However, the introduction of public benefits could displace informal mechanisms for risk-protection, which are especially prevalent in LMICs. If the displacement of private transfers is considerably large, the expansion of social protection programs could even lead to social welfare loss. In this paper, we critically survey the recent empirical literature on crowd-out effects in response to public policies, specifically in the context of LMICs. We review and synthesize patterns from the behavioral response to various types of social protection programs. Furthermore, we specifically examine for heterogeneous treatment effects by important socioeconomic characteristics. We conclude by drawing on lessons from our synthesis of studies. If poverty reduction objectives are considered, along with careful program targeting that accounts for potential crowd-out effects, there may well be a net social gain.

Keywords: crowd-out effect; developing countries; social protection; retirement; life cycle; inter vivos transfers (search for similar items in EconPapers)
JEL-codes: D64 H31 H55 J14 J22 J26 O15 O16 R2 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2020-03
New Economics Papers: this item is included in nep-age
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Published - published in: World Development, 2020, 134 (104967).

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Related works:
Journal Article: Do public program benefits crowd out private transfers in developing countries? A critical review of recent evidence (2020) Downloads
Working Paper: Do Public Program Benefits Crowd Out Private Transfers in Developing Countries? A Critical Review of Recent Evidence (2020) Downloads
Working Paper: Do Public Program Benefits Crowd Out Private Transfers in Developing Countries? A Critical Review of Recent Evidence (2020) Downloads
Working Paper: Do Public Program Benefits Crowd Out Private Transfers in Developing Countries? A Critical Review of Recent Evidence (2020) Downloads
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