Rates of Return of Social Protection in Cambodia

The dynamic benefit on poverty and inequality ( BPd , BGd ) is estimated for the effect between



t  1 and t  T , where T  1,..., 20 , based on the results of the dynamic microsimulation.

These benefits include household effects and the returns on human capital accumulation at the household level. The benefit is the difference of the changes in poverty and inequality between the base line and policy scenarios over time (from t  1 to t  T ).

BPd,t T   Pt 01  Pt1T    Pt 01  Pt 0T    Pt 0T  Pt1T 

(Equation 15)

BGd ,t T   Gt01  Gt1T    Gt01  Gt0T    Gt0T  Gt1T 

(Equation 16)

Table 28 presents results of equations 13 to 16 for selected periods. Results for every period are in table 52 (Annex 7). SPI and their benefits are simulated according to the demographic pattern previously mentioned, and the outcomes from table 51 (Annex 6). Total average education level is slightly higher if social protection investments are introduced. For example, in periods 5 and 20 the median education level (schooling) is 0.02 and 0.14 years higher (0.4% and 1.5%, respectively) under a simulation with SPI than under the simulation without it.

Figure 10: Total population average education level (schooling) with and without SPI (X axis = period) Years of education

Difference (Bs)

10.0

9.7

9.5

0.160

9.6

9.0

0.180

0.14

0.140

8.5

0.120

8.0

0.100

7.5

0.080

7.0

0.060

6.5

0.040

6.0 5.5

0.020

5.5

0.000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Without SPI

With SPI

Bs (schooling - years)

Source: Own calculations based on CSES 2009.

Nevertheless the difference is higher than 0.5% after 6 periods and higher than 1% after 10 periods. In this sense, the duration of SPI is important to achieve benefits in terms of human capital accumulation. Furthermore, the increasing quality of education and its economic returns create incentives to invest further in education.

Table 28: Dynamic benefits of social protection investments – Difference between base line and policy scenarios in period t = T = {5, 10, 15, 20} Benefit BS (Schooling - years) BC (Average household consumption growth rate per year - %) BP (Poverty - headcount - %) BG (Inequality - Gini index)

Period 5 0.024 0.256 4.830 0.014

Period 10 0.079 0.116 4.200 0.013

Period 15 0.129 0.072 3.800 0.012

Period 20 0.141 0.043 2.630 0.010

Note: Average household consumption growth rate per year is estimated between periods t =1 and t = T. 78