Ex ante assessment of the potential impact of labor-intensive public works in Liberia

Apart from fiscal measures, another initiative taken by the government of Liberia to respond to the economic crisis consisted in the launch of a cash for work temporary employment program. This part of the study consists of three chapters devoted to the analysis of the program. First, in this chapter which was written before the program was actually implemented, we provide an ex ante analysis of the potential impact of such a program, relying on simulation techniques rather than on impact evaluation. The approach is very simple. We assess who may be potentially interested in articipating in the public works program by identifying working individuals without pay, as well as for every level of proposed wage in the public works, those individuals who work but now earn less than the public works wage, since all these individuals may indeed be interested in participating in the program to increase their earnings. We also consider as potential beneficiaries the unemployed whose reservation wage is below the proposed public works wage. Next, we randomly select among the pool of potential beneficiaries of the program a number of participants. Finally, we estimate for the assumed participants to the program two key parameters which affect the potential impact of the program on the poor: the targeting performance of the program, and the substitution effect of the program, whereby only part of the wages paid to beneficiaries generate additional income, because at least some of the beneficiaries would probably have done other work if they had not participated in the program. The results suggest that such a cash for work program could be well targeted, but that this is by no means assured ex ante.