Social Interactions and the Optimal Design of Welfare Systems

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Regarding the provision of public services, whether in education, health, poverty alleviation, or others, quality of service is as important as quantity in both developed and developing nations. Those services are provided by teachers, doctors, nurses, or social workers (for example), and discussing quality of services means discussing their recruitment and performance.Our project studies this within the welfare system. We focus on the importance of social worker (SW) quality for the families they serve, and on how to redesign the allocation of SWs to families to improve the overall effectiveness of the system.We examine a social programme, Chile Solidario (CS), targeting the poorest 2.5% Chileans, and generalise the lessons learned to other contexts. We also provide new statistical and economic tools to address important and challenging issues in our analysis: how to measure SW quality, how to account for social interactions in the choices and behaviours of poor families, how to optimally allocate SWs to families with or without the presence of social interactions across families.1. What difference do SWs make to the outcomes of the families they serve? What determines their effectiveness? How important is the selection of SWs for each family?Most studies evaluating welfare services ignore the provision quality, mainly because quality is difficult to measure. Yet, quality differences between providers may drive large differences in their impact. Because of the difficulty in collecting relevant, observable input-based quality measures, researchers have turned to performance-based measures. The most glaring example is education, where teacher value added (VA) estimates have gained traction as a measure of teacher quality. Teacher VA measures the average learning of children taught by a particular teacher. In this project we will produce the first estimates of SW VA for a Chilean welfare program targeting the poorest members of society (bottom 2.5% of the income distribution). We recognise that SWs operate on several dimensions of families' lives. Therefore, we will compute VA in terms of different outcomes and will assess the extent to which SWs specialise across outcomes.2. How large are spillovers in social program participation? Through which mechanisms do they operate? How do spillovers affect the design and targeting of social programs?Typical social programme evaluations focus on individual impacts. There is however increasing concern that social programs have impacts well beyond the individual. Possible spillovers from treated individuals to other members of the community have been increasingly added into program evaluations, and even influenced their designs. It is particularly fitting to examine spillovers in the context of anti-poverty programs. Social interactions may influence both the take up of such programs (say, through the potential of stigma, or through the sharing of information), and their impacts on the lives of the poor. The empirical models studying such spillovers are relatively limited though, so far ignoring feedback effects generated by interactions between members of the same group. Feedback effects are interesting because they can amplify or dampen programme impacts, possibly leading to participation and non-participation traps. We build on recent econometric work on these topics to identify and estimate models with social interactions.3. How do we quantify SW VA in the presence of social interactions? How do interactions change the optimal allocation of SWs to families? It is natural to put these questions together and re-examine the calculation of SW VA in the presence of spillovers. In this context, the impact of a SW can go well beyond its impact on the outcomes of the targeted family. Social interactions of this type can affect the optimal match of families and SW. What matters is not only this match, but also the way it spreads through the network.