Long-term Impacts of Poverty Programs: A Local-economy Cost-benefit Analysis of Lesotho's Child Grants Programme

This study quantifies the long-run impacts of Social Cash Transfers (SCTs) and carries out the first ever (to our knowledge) long-run cost-benefit analysis of a SCT program. The impacts of SCTs include socio-economic and productive outcomes in beneficiary households as well as the economic spillovers that result from linkages between beneficiaries and non-beneficiaries within local economies. Using data from the PtoP impact evaluation of Lesotho’s Child Grants Program (CGP), we parameterize a cost-benefit model and estimate costs and benefits for both beneficiary and non-beneficiary households. The long-run benefits accruing to beneficiary households include the transfers themselves, plus a future stream of returns from human, physical and social capital formation stimulated by the program. These income gains, in turn, generate income multipliers in treated economies. We use unique panel data from Lesotho to model capital formation within treated households, together with the effect of this capital on household income. Then we link the cost-benefit model for CGP beneficiaries with a local economy-wide impact evaluation (LEWIE) model. We find that the discounted future stream of benefits from the CGP substantially exceed the program’s costs in the village clusters initially included in the program. The CGP produces 42.11 million Lesotho loti (LSL) in discounted benefits over a ten-year period, compared to a total discounted program cost of 22.38 million LSL.