The Cost of Poverty Alleviation Transfer Programs: A Complete Analysis of Three Programs in Latin America

This paper addresses the criticism faced by antipoverty programs  that of high share of administrative (non-transfer) costs in comparison to their effectiveness. It proposes and implements a replicable methodology for a comparative cost analysis of three similar poverty alleviation programs in Latin America:

• Programa Nacional de Educacin Salud y Alimentacin (PROGRESA) in Mexico,
• Programa de Asignacin Familiar-Fase II (PRAF) in Honduras,
• Red de Proteccin Social (RPS) in Nicaragua.

The study assesses the cost efficiency of these programs and points out that:

• There is little rigorous empirical evidence on the costs and cost structures of social safety net programs;
• Improved information and a better understanding of the program costs are crucial for effective policymaking;
• Analysis of programs with high initial fixed costs lead to different conclusions at different stages of maturity, and in different time periods.

Further, the paper assesses the cost-efficiency of PROGRESA, PRAF, and RPS by focusing on the cost-transfer ratio, defined as the ratio of non-transfer costs (administrative costs) to transfers.The findings from the study underscore that in order to make a credible assessment of cost-efficiency, a detailed analysis of program cost structures that goes well beyond simply providing aggregate cost information, is required.