Evaluating spillovers and cost-effectiveness of complementary agricultural and social protection interventions. Evidence from Lesotho

We present findings from a study of the local-economy impacts of one of Lesotho’s largest social programmes, the Child Grants Programme, and a multi-faceted rural development intervention, which provided support in the form of community-based savings and lending groups, homestead gardening, nutrition training and market access. We designed a micro-data parameterized general equilibrium model of local economies in rural Lesotho and used it to simulate the direct and indirect impacts of the two combined interventions and assess the cost effectiveness of these programmes, alone and in combination, taking into account the income and production spillovers they generate. A local economy-wide cost-benefit analysis reveals that the Child Grants Programme, alone and in combination with all of the rural development programme components, generates total discounted benefits that exceed discounted programme costs. Considering local-economy spillovers is essential in order for a cash transfer like the Child Grants Programme to pass a cost-benefit test, and it substantially increases the estimated cost-benefit ratios for productive interventions, as well. From a policy perspective, our results suggest that by better integrating with outside markets, it is possible to attain substantial cost-effective income gains for the local economy.