There are a number of cash transfer (CT) programmes in Sub-Saharan Africa intended to aid the most vulnerable households. Because targeting strategies limit eligibility to resource-constrained and labor-poor households, the design of these programmes would seem to work against the creation of positive production spillovers. From a local economy-wide perspective, though, beneficiary households are a conduit through which new cash enters the rural economy. As they spend their cash, the beneficiary households unleash general equilibrium (GE) effects that transmit programme impacts to others in the economy, including non-beneficiaries. Most households that do not receive cash transfers are ineligible because they fail to meet the poverty-related criteria and are not labor constrained; they may be better positioned to expand production when demand is stimulated by cash transfers.
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 programmes 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.
The traditional starting point for constructing GE models is the development of a social accounting matrix (SAM) for a given geographic area; the LEWIE model requires the construction of household-village (local) social accounting matrices (SAMs) using household, enterprise, and community survey data collected as part of the baseline and/or follow up surveys in each of the countries in which evaluations of cash transfer programmes are carried out. Separate SAMs are constructed for the households that will receive the randomized transfer, for control-group households, and when available, for ineligible households in both the beneficiary and control villages.
Taylor, J. E.; Kagin, J.; Filipski, M.; Thome, K. Evaluating General Equilibrium Impacts of Kenya’s Cash Transfer Programme for Orphans and Vulnerable Children (CT-OVC). Food and Agriculture Organization of the United Nations, Rome, Italy (2013) iv + 38 pp.