Executive Summary: Rates of Return of Social Protection

The results suggest that malnutrition is not only determined by household economic conditions. In the case of poor children, the education level of the mother and sanitation conditions (approximated by toilet facility) have a higher effect on the probability of being malnourished. This indicates the need for complementary policies to address the nutrition objectives. Social transfers, by increasing household income, may generate positive effects on nutrition if they are implemented together with other policies (e.g. improving access to water and sanitation, or preventive health care measures, such as training in child feeding practices).

Labour The effect of social cash transfers on labour decisions is studied using different regression models, with household consumption as a proxy for household disposable income. For working age adults (18 - 64 years), a 10% increase in household consumption reduces the probability of unpaid work both for poor individuals in urban (by 10 percentage points) and rural (8.9 percentage points) areas, and for non-poor persons in urban (2.8 percentage points) and rural (1.4 percentage points) areas. The effect on paid work is not significant at the national level, but it is positive for poor individuals in rural areas (5.9 percentage points increase). In this sense, social protection is likely to generate labour mobility from unpaid to paid activities in Cambodia, as the transfers help poor households to overcome financial constraints to labour market participation, such as transportation and search costs.

With respect to labour supply (measured by the number of working hours), an increase in household consumption does not affect the behaviour of the urban poor. However, it does reduce labour supply in the case of poor rural individuals, which may be related to a change from unpaid to paid activities. Further estimations show that a 10% increase in household consumption boosts labour supply by 1.2% for all individuals between 18 and 64 years old with consumption under USD 100 per person per month. It seems that social protection, rather than discouraging, seems to foster labour especially in the case of poor persons.

Finally, it is shown that social protection, by increasing household disposable income encourages formal labour. A 10% increase in household consumption raises the probability of paid work by 22 percentage points for the 18-30 years old. However, this last effect depends on the capacity of the economy to increase labour opportunities in the formal sector.

Long-term benefits In order to estimate benefits of social protection over time, a dynamic model is simulated.

The model includes three modules: demography, human capital accumulation and household consumption based on the effects from the static microsimulation models. Other variables and changes in economic and structural conditions are assumed to have the same effects on the base line without social protection and the joint policy scenario, and therefore cancel out.

The simulation is done for a 20 year horizon and provides estimates for a comparative analysis between a base line and the joint policy scenario. The joint policy scenario includes: i) cash transfers for poor children up to 6 years old in rural areas, limited up to two children per household, ii) social pensions for poor persons over 64 years old, iii) scholarships for poor children in rural areas attending lower secondary education, and iv) a public works programme (PWP) covering 10% of poor households in rural areas.

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