Some policies only achieve their objectives indirectly through spillover effects for example:
A) A program provides loans to small business in the hopes that increased labor demand will increase wages for unskilled labor
B) Agricultural research and extension programs who aim to increase the well-being of adopting famers
C) A resulting increase in food prices from a policy mean some poor become worse off as a result of the policy
D) When a cash transfer program increases some incomes of the non-poor.

Question

Quizplus · Accepted Answer

The program providing loans to small businesses is not directly increasing wages for unskilled labor but rather is relying on the spillover effect of increased labor demand leading to increased wages.

Answer: B
 Agricultural research and extension programs do not directly increase the well-being of adopting farmers but rather rely on the spillover effect of increased agricultural productivity and income.

Answer: C
 The policy that leads to an increase in food prices may not directly harm the poor but it can lead to spillover effects that negatively impact some poor individuals.

Answer: D
 When a cash transfer program increases incomes of non-poor individuals, it may not directly benefit the intended beneficiaries but rather relies on spillover effects such as increased economic activity.

Some Policies Only Achieve Their Objectives Indirectly Through Spillover Effects