Selective inclusion in cash transfer programs: Unintended consequences for social cohesion

Rising poverty has led to an unprecedented expansion of social protection programs. In 2021 over $2.9 trillion have been devoted to social protection programs, representing about 3% of global gross domestic product (Gentilini et al., 2020; IPC-IG, 2021). The majority of this global spending has been devoted to social assistance, and in particular cash transfer programs. The coverage of cash transfer programs increased by over 200 percent relative to pre-COVID-19 levels. Despite the trends in social protection, expansions have been unequal across countries (Gentilini et al., 2020). Indeed, the coverage of social protection in low-income countries remains patchy, and largely insufficient to cover needs, despite attention from global donors. These funding limitations in lower income countries engender difficult decisions over how social protection revenue should be dispersed, and who should be prioritized in targeting.

This article explores the implications of poverty targeting in cash transfer programs in a context of already widespread poverty (Ellis, 2012). Large informal economies mean that information on household welfare is not readily available. Recurrent shocks also mean that even if measured, household welfare is constantly changing, making data collection efforts quickly outdated. Insufficient budgets to cover all those in need imply that selection is needed, even among poor households. And when crises hit, aid needs to be quickly given to those in extreme conditions (i.e., without food).