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Productive Effects of Public Works Programs: What do we know? What should we know?

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  • Gehrke, Esther
  • Hartwig, Renate

Abstract

Public works programs (PWPs) are popular development interventions due to their potential ‘double dividend’ of transferring income to the poor while at the same time creating public infrastructure. However, PWPs are costly and demanding from an administrative perspective and it is not clear whether they are the most cost-effective intervention to reduce poverty. Therefore, an assessment of PW programs needs to understand which benefits and costs these programs entail relative to other interventions, and whether or not the extra cost can be outweighed by generating benefits over and above those of alternative interventions, such as Cash Transfer programs. This paper seeks to identify these benefits, and develops a conceptual framework that highlights four mechanisms through which PWPs could strengthen the productive capacity of poor households beyond the effects of Cash Transfers: productive investments, labor market effects, skills development, and increases in trade and production. It then reviews available empirical evidence from PWPs in developing countries. The results suggest that PWPs can induce productive investments via income and insurance effects when the program is sufficiently reliable and long-term. PWPs can also have positive welfare effects by raising wages, but potential adverse effects on labor markets have to be taken into account. Implicit or explicit training components of PWPs do not seem to increase the employability or business earnings of participants. Finally, there is only scant empirical evidence on the productive effects of the public infrastructure generated by PWPs, and further research is crucial to understand and quantify those effects. This paper concludes that PWPs are only preferable over alternative interventions if they generate substantial investments among the target group, if there is clear evidence that private-sector wages are below equilibrium wages, or if the public infrastructure generated in PWPs has substantial growth effects.

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  • Gehrke, Esther & Hartwig, Renate, 2018. "Productive Effects of Public Works Programs: What do we know? What should we know?," OSF Preprints mpksj, Center for Open Science.
  • Handle: RePEc:osf:osfxxx:mpksj
    DOI: 10.31219/osf.io/mpksj
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    3. Jules Gazeaud & Eric Mvukiyehe & Olivier Sterck, 2019. "Cash Transfers and Migration: Theory and Evidence from a Randomized Controlled Trial," CSAE Working Paper Series 2019-16, Centre for the Study of African Economies, University of Oxford.
    4. Loewe, Markus & Zintl, Tina & Fritzenkötter, Jörn & Gantner, Verena & Kaltenbach, Regina & Pohl, Lena, 2020. "Community effects of cash-for-work programmes in Jordan: Supporting social cohesion, more equitable gender roles and local economic development in contexts of flight and migration," IDOS Studies, German Institute of Development and Sustainability (IDOS), volume 103, number 103, April.
    5. Jules Gazeaud & Victor Stephane, 2020. "Productive Workfare? Evidence from Ethiopia’s Productive Safety Net Program," Working Papers 2037, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    6. Borga, Liyousew G. & D’Ambrosio, Conchita, 2021. "Social protection and multidimensional poverty: Lessons from Ethiopia, India and Peru," World Development, Elsevier, vol. 147(C).
    7. Nataliya P. Mokrytska & Mariya S. Dolynska & Iryna O. Revak, 2019. "Financing of Public Works as a Form of Temporary Legal Employment of Unemployed Citizens in Ukraine," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(2), pages 239-250.
    8. Markus Loewe & Tina Zintl, 2021. "State Fragility, Social Contracts and the Role of Social Protection: Perspectives from the Middle East and North Africa (MENA) Region," Social Sciences, MDPI, vol. 10(12), pages 1-23, November.
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    10. Muhammad Ali Asadullah, 2019. "Quadratic Indirect Effect of National TVET Expenditure on Economic Growth Through Social Inclusion Indicators," SAGE Open, , vol. 9(1), pages 21582440198, March.
    11. Tina Zintl & Markus Loewe, 2022. "More than the Sum of Its Parts: Donor-Sponsored Cash-for-Work Programmes and Social Cohesion in Jordanian Communities Hosting Syrian Refugees," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 34(3), pages 1285-1307, June.
    12. Karim, Azreen & Noy, Ilan, 2020. "Risk, poverty or politics? The determinants of subnational public spending allocation for adaptive disaster risk reduction in Bangladesh," World Development, Elsevier, vol. 129(C).

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    JEL classification:

    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J4 - Labor and Demographic Economics - - Particular Labor Markets
    • H4 - Public Economics - - Publicly Provided Goods
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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