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Public Works as a Safety Net
community assets built represent a 54 percent additional return for labor (Chacaltana 2003). This figure is slightly lower than the indirect multiplier of civilian works—estimated to be between 1 and 2—but this is the result of the mix of projects, which include activities that can provide a small added value to the rest of the economy, such as afforestation. The overall multiplier effects of additional employment in the local economy were found to be positive in the long run, particularly where incomes saved were invested in further productive activities.
Cost-Effectiveness Public works, like all other safety net programs, transfer cash benefits to participants, albeit in return for work. As such, it would be useful to determine how cost-effective a public works program is in transferring income to the poor, relative to other safety net programs. Estimation of costeffectiveness should take into account both the costs and the benefits of the program. The analysis of program cost usually takes into account both the direct and indirect impacts of the program before concluding if public works are an expensive way to transfer income to poor households compared to other programs. Cost information should include budget data disaggregated by activity (labor, administrative, managerial, input materials) and by project (roads, irrigation infrastructure). It should also take into account targeting efficiency to assess the proportion of funds that actually reach the intended beneficiaries. The calculation of benefits should include short-term direct outcomes, measured by the increase in employment and income of participants, discounted by the cost of participation and opportunity cost5; and the potential medium- to long-term indirect impacts, measured by value added to the community and secondround employment benefits from assets created. Typically, the information needed to conduct a comprehensive analysis of costs and benefits is not available at the start of the program. In the absence of such information, analysts have attempted to calculate cost-effectiveness using plausible assumptions. Ravallion (1999) suggested simple analytical tools to calculate a comprehensive measure to rapidly appraise the costeffectiveness of public works programs in raising the income of the poor. The analysis proposed focuses on the values of five key variables: • The proportion of the total wage bill over the total operating cost • Targeting performance—proportion of the wages paid out to workers who are poor as a percentage of total wages paid to all workers (both poor and nonpoor)