Expanded Social Protection May Do More Harm Than Good: A Pessimistic Review

Abstract

There is growing interest in expanded social protection programs, even for the poorest countries. Technology now allows cash transfers to be delivered to masses of people with only weak connections to the formal economy. Also there are demonstrated effects of conditional cash transfers in improving aspects of human capital. Yet it is doubtful that social protection programs can provide a floor sufficient to eradicate extreme poverty without harming incentives and without unduly taxing a small minority of highly skilled, and increasingly mobile, workers. Long-term fiscal obligations from expanded social transfers, potential for distorted work choices, unknown interactions with informal safety nets and difficulties of targeting beneficiaries all suggest grounds for caution.