I 1iN **ICY** RrsVSARCH WORKING PAPER 2728

# Summary findings

Emergency programs are designed to soften the impact of economic crises-income shocks experienced by an entire comimunitv or country-on consumption and human capital accumulation. Of particular concern are poor people: as a result of inadequate savings or inadequiate access to credit or insurance markets, the poor are unable to draw on resources from better times to offset a loss in income today. Further, the systemic nature of the shocks means that risk cannot be effectively pooled through local informal insurance mechanisms.

Emergency interventions have included social funds, workfare programs, training programs, conditional transfers (linked to health center visits or children's school attendance, for example), and traditional direct, uLlconditionial transfers in kind (such as communal tables or targeted food handouts).

Maloney highlights some conceptual problems in choosing among these options and evaluating one program of a certain type relative to another. It argues that most such interventions can be thought of as containiing both a transfer and an investment component and that their evaluation as _emergency_ programs needs to more explicitly incorporate the intertemporal nature of their design. More specifically, the mandated investments in physical or human capital will benefit the poor, but only in the future-after the crisis-and their implementation diverts resources from alleviating present hardship. This needs to be reflected in the discount factor used to evaluate these investments. Maloney argues that the way emergency programs are financed, particularly the way the burden is shared between central and municipal governments, also has important implications for the criteria for evaluation.

The analysis suggests that most conventional means of evaluating projects-net present value at market discount rates, labor intensity, cost per job created-may _not_ be relevant or are at least ambiguous in the context of emergency programs. As a result, policymakers are left with few "hard" indicators with which to evaluate such programs. Maloney argues for an approach in which the policymaker weighs the appropriateness of deviations from the theoretically "ideal" benchmark program, which delivers a "smart" transfer costlessly to the target beneficiary, and discusses the arguments for or against these deviations. The modest goal of the proposed approach is to clarify the key issues and provide more solid grounding for the necessarily subjective judgment calls that policyinakers will inevitably have to make.

Tlhis paper-a product of the Poverty Reduction and Eco nomic Management Sector Unit, Latin America and the Caribbean Region-is part of a larger effort in the region to improve the design of safety nets. Copies of the paper are available free from the World Bank, 1818 H Street NW, Washington, DC 20433. Please contact Anne Pillay, room 18-104, telephone 202-458-8046, fax 202-522-2119, email address apillay@worldbank.org. PolicyResearch WorkingPapers are also posted on the Web at http://econ.worldbank.org. The author may be contacted at wmaloney@worldbank.org. December 2001. (24 pages) _rhe Policy Research WVorking Paper Series disseminates the findings of work in progress to encourage the exchange of ideas ahout development issues. An obhective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the itames of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper Ire entirely those of the authors. The) do not necessarily represent the view of the World Bank, its Executive Directors, or the countries they represent._ Produced by the Policy Research Dissemination Center