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Cash transfer programs may generate significant general equilibrium effects that can detract from the anti-poverty goals of the program. Data from a randomized evaluation of a Philippine cash transfer program targeted to poor households show that a 9 percent increase in village income significantly raised the prices of perishable protein-rich foods while leaving other food prices unaffected. The price changes are largest in areas with the highest program saturation, where the shock to village income is on the order of 15 percent and persists more than 2.5 years after program introduction. Although significantly improving nutrition related outcomes among beneficiary children, the cash transfer worsened those same indicators among non-beneficiary children. The stunting rate of young non-beneficiary children increased by eleven percentage points, with even greater increases in the most saturated areas. Another potentially related spillover arises in local health markets: formal health care utilization by mothers and children also declined among non-beneficiary households. Failing to consider such local general equilibrium effects can overstate the net benefit of targeted cash transfers. In areas where individual targeting of social programs covers the majority of households, offering the program on a universal basis should avoid such negative impacts at little additional cost.

Access of Poor to Social Services --- Cash Transfers --- Disability --- Early Child and Children's Health --- Economic Assistance --- Food Prices --- General Equilibrium Effects --- Health Care Services Industry --- Health, Nutrition and Population --- Industry --- Inequality --- Macroeconomics and Economic Growth --- Nutrition --- Poverty Reduction --- Reproductive Health --- Services & Transfers to Poor --- Social Protections and Labor --- Spillovers

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This paper reports an experiment in over 3,000 Indonesian villages designed to test the role of performance incentives in improving the efficacy of aid programs. Villages in a randomly-chosen one-third of subdistricts received a block grant to improve 12 maternal and child health and education indicators, with the size of the subsequent year's block grant depending on performance relative to other villages in the subdistrict. Villages in remaining subdistricts were randomly assigned to either an otherwise identical block grant program with no financial link to performance, or to a pure control group. We find that the incentivized villages performed better on health than the non-incentivized villages, particularly in less developed areas, but found no impact of incentives on education. We find no evidence of negative spillovers from the incentives to untargeted outcomes, and no evidence that villagers manipulated scores. The relative performance design was crucial in ensuring that incentives did not result in a net transfer of funds toward richer areas. Incentives led to what appear to be more efficient spending of block grants, and led to an increase in labor from health providers, who are partially paid fee-for-service, but not teachers. On net, between 50-75% of the total impact of the block grant program on health indicators can be attributed to the performance incentives.