Designing and evaluating social safety nets

"This paper reviews issues highlighted in the literature on the performance of commonly found social safety net programs in developing countries. It makes particular reference to food subsidies (universal and administratively targeted), public works schemes, and targeted human capital subsidies. Although this set of programs is not exhaustive, it does account for a large proportion of program types, and many of the issues raised here apply equally to other social expenditures." from Author's AbstractSafety nets ,evaluation ,Food subsidies ,Community participation ,Public works ,social policies ,Income distribution ,Poverty alleviation ,

Designing and evaluating social safety nets

"This paper reviews the literature on the performance of commonly found social safety net programs in developing countries. The evidence suggests that universal food subsidies have very limited potential for redistributing income. While targeted food subsidies have greater potential, this can only be realized when adequate attention is given to the design and implementation, as well as to the social and political factors influencing the adoption, of these programs. Although well-designed public works programs have impressive targeting performance, they have large non-wage costs; thus, to be cost-effective, they need to produce outputs that are especially beneficial to poor households. Social funds, which emphasize both community involvement and asset creation, have been cost-effective, but they are difficult to target to extremely poor households. Traditional public works programs are particularly attractive for addressing vulnerability, but they require flexibility regarding choice of output. Targeted human capital subsidies appear to have great potential for addressing extreme poverty; but again, their design needs to reflect the human capital profile of countries and the administrative capability of the government." Author's AbstractSafety nets ,evaluation ,Food subsidies ,Poverty alleviation ,social policies ,Income distribution ,Community participation ,Public works ,

Commodity Taxation and Social Welfare: The Generalised Ramsey Rule

Commodity taxes have three distinct roles: (1) revenue collection, (2) interpersonal redistribution, and (3) resource allocation. The paper presents an integrated treatment of these three concerns in a second-best general equilibrium framework, which leads to the "generalised Ramsey rule for optimum taxation. We show how many standard results on optimum taxation and tax reform have straightforward counterpart in this general framework. Using this framework, we also try to clarify the notion of "deadweight loss", as well as the relation between alternative distributional assumptions and the structure of optimum taxes.

Commodity Taxation and Social Welfare: The Generalised Ramsey Rule

Commodity taxes have three distinct roles: (1) revenue collection, (2) interpersonal redistribution, and (3) resource allocation. The paper presents an integrated treatment of these three concerns in a second-best general equilibrium framework, which leads to the 'generalised Ramsey rule' for optimum taxation. We show how many standard results on optimum taxation and tax reform have a straightforward counterpart in this general framework. Using this framework, we also try to clarify the notion of 'deadweight loss' as well as the relation between alternative distributional assumptions and the structure of optimum taxes.Commodity taxation, efficiency, redistribution, shadow prices

Evaluating targeted cash transfer programs: a general equilibrium framework with an application to Mexico

This report focuses on the indirect and direct effects of transfer programs. In particular, it shows how modelling results can be combined with information from standard household surveys to provide an integrated analysis of the direct distributional impact of such programs and the indirect distributional and efficiency impacts arising from domestic financing mechanisms. This approach reflects the view that any credible poverty alleviation strategy must have a credible financing strategy underlying it, and this need for domestic financing can have important consequences for both the level and the distribution of household incomes. To illustrate the approach, the report focuses on the recent introduction in Mexico of an innovative poverty alleviation transfer program called PROGRESA, which has been used as a prototype for similar programs that have recently been implemented in other developing countries.Economic assistance, Domestic Mexico Evaluation, Public welfare - Mexico Evaluation,

On the targeting and redistributive efficiencies of alternative transfer instruments

The paper shows how the so-called distributional characteristic of a policy instrument can be additively decomposed into two components; one that captures the targeting efficiency of the instrument, the other its redistributive efficiency. Using these measures, the paper provides an interpretation of the commonly used leakage and undercoverage rates (and other indices based on these concepts) within standard welfare theory. An empirical application of the decomposition approach to Mexican data is presented.Welfare economics Mathematical models ,Mexico ,

Are the welfare losses from imperfect targeting important?

The authors evaluate the size of the welfare losses from using alternative “imperfect” welfare indicators as substitutes for the conventionally preferred consumption indicator. They find that whereas the undercoverage and leakage welfare indices always suggest substantial losses, and the poverty indices suggest substantial losses for the worst performing indices, their preferred welfare index based on standard welfare theory suggests much smaller welfare losses. They also find that one cannot reject the hypothesis that the welfare losses associated with using the better performing alternative indicators are zero. In the case of their preferred welfare index, this reflects the fact that most of the targeting errors, i.e., exclusion and inclusion errors, are highly concentrated around the poverty line so that the differences in welfare weights between those receiving and not receiving the transfers are insufficient to make a difference to the overall welfare impact.Welfare economics. ,Poverty. ,Consumption (Economic theory). ,

On the targeting and redistributive efficiencies of alternative transfer instruments

The paper shows how the so-called distributional characteristic of a policy instrument can be additively decomposed into two components; one that captures the targeting efficiency of the instrument, the other its redistributive efficiency. Using these measures, the paper provides an interpretation of the commonly used leakage and undercoverage rates (and other indices based on these concepts) within standard welfare theory. An empirical application of the decomposition approach to Mexican data is presented.Welfare economics Mathematical models ,Mexico ,

Are the welfare losses from imperfect targeting important?

The authors evaluate the size of the welfare losses from using alternative “imperfect” welfare indicators as substitutes for the conventionally preferred consumption indicator. They find that whereas the undercoverage and leakage welfare indices always suggest substantial losses, and the poverty indices suggest substantial losses for the worst performing indices, their preferred welfare index based on standard welfare theory suggests much smaller welfare losses. They also find that one cannot reject the hypothesis that the welfare losses associated with using the better performing alternative indicators are zero. In the case of their preferred welfare index, this reflects the fact that most of the targeting errors, i.e., exclusion and inclusion errors, are highly concentrated around the poverty line so that the differences in welfare weights between those receiving and not receiving the transfers are insufficient to make a difference to the overall welfare impact.Welfare economics. ,Poverty. ,Consumption (Economic theory). ,

The Cost of Poverty Alleviation Transfer Programs: A Comparative Analysis of Three Programs in Latin America

A common criticism of antipoverty programs is that the high share of administrative (nontransfer) costs substantially reduces their effectiveness. Yet, there is surprisingly little rigorous empirical evidence on program costs. Improved information and a better understanding of the costs of such programs are crucial for effective policymaking. This study proposes and implements a replicable methodology for a comparative cost analysis of three similar poverty alleviation programs in Latin America, and assesses their cost efficiency. The findings underscore that any credible assessment of cost-efficiency requires a detailed analysis of program cost structures that goes well beyond simply providing aggregate cost information.cost efficiency, poverty alleviation, human capital, Honduras, Mexico, Nicaragua