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The Welfare Returns to Finer Targeting: The Case of The Progresa Program in Mexico

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  • David Coady

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    Abstract

    It is common in developing countries to attempt finer targeting of the benefits from social safety net programs through combining different targeting methods. We evaluate the returns to finer targeting in the context of the PROGRESA program in Mexico. This program is a prominent program in the literature reflecting the fact that it has been widely evaluated, is perceived to be well targeted, and has been used as a prototype for many other programs in the region and beyond. We also identify the relative incremental contribution of each targeting method to the overall targeting performance of the program. We find that geographic targeting dominates demographic targeting (based on linking transfer levels to demographic composition), which in turn dominates household proxy-means targeting. However, the contribution of proxy-means targeting increases substantially as the program expands into less marginal localities. Adjusting for incomplete take-up increases the targeting performance of the program only slightly. Copyright Springer Science + Business Media, Inc. 2006

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    File URL: http://hdl.handle.net/10.1007/s10797-006-4824-2
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    Bibliographic Info

    Article provided by Springer in its journal International Tax and Public Finance.

    Volume (Year): 13 (2006)
    Issue (Month): 2 (May)
    Pages: 217-239

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    Handle: RePEc:kap:itaxpf:v:13:y:2006:i:2:p:217-239

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    Web page: http://www.springerlink.com/link.asp?id=102915

    Related research

    Keywords: geographic targeting; proxy-means targeting; self-selection; finer targeting; combining targeting methods; welfare; Mexico;

    References

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    1. Ravallion, Martin, 1994. "Measuring Social Welfare with and without Poverty Lines," American Economic Review, American Economic Association, vol. 84(2), pages 359-64, May.
    2. Hoddinott, John & Skoufias, Emmanual, 2003. "The impact of Progresa on food consumption," FCND briefs 150, International Food Policy Research Institute (IFPRI).
    3. Behrman, Jere R. & Deolalikar, Anil B., 1988. "Health and nutrition," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 14, pages 631-711 Elsevier.
    4. Dreze, Jean & Stern, Nicholas, 1987. "The theory of cost-benefit analysis," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 2, chapter 14, pages 909-989 Elsevier.
    5. Lanjouw, Peter & Ravallion, Martin, 1995. "Poverty and Household Size," Economic Journal, Royal Economic Society, vol. 105(433), pages 1415-34, November.
    6. Feldstein, Martin S, 1972. "Distributional Equity and the Optimal Structure of Public Prices," American Economic Review, American Economic Association, vol. 62(1), pages 32-36, March.
    7. David Coady & Emmanuel Skoufias, 2004. "On the Targeting and Redistributive Efficiencies of Alternative Transfer Instruments," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 50(1), pages 11-27, 03.
    8. Ahmad,Etisham & Stern,Nicholas, 1991. "The Theory and Practice of Tax Reform in Developing Countries," Cambridge Books, Cambridge University Press, number 9780521265638.
    9. Sandmo, Agnar, 1976. "Optimal taxation : An introduction to the literature," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 37-54.
    10. Alan J. Auerbach, 1982. "The Theory of Excess Burden and Optimal Taxation," NBER Working Papers 1025, National Bureau of Economic Research, Inc.
    11. Deaton, A. & Zaidi, S., 1999. "Guidelines for Constructing Consumption Aggregates for Welfare Analysis," Papers 192, Princeton, Woodrow Wilson School - Development Studies.
    12. David Coady & Jean Drèze, 2002. "Commodity Taxation and Social Welfare: The Generalized Ramsey Rule," International Tax and Public Finance, Springer, vol. 9(3), pages 295-316, May.
    13. Skoufias, Emmanuel & Davis, Benjamin & de la Vega, Sergio, 2001. "Targeting the Poor in Mexico: An Evaluation of the Selection of Households into PROGRESA," World Development, Elsevier, vol. 29(10), pages 1769-1784, October.
    14. Ahmad, Ehtisham & Stern, Nicholas, 1984. "The theory of reform and indian indirect taxes," Journal of Public Economics, Elsevier, vol. 25(3), pages 259-298, December.
    15. Ravallion, M., 1992. "Poverty Comparisons - A Guide to Concepts and Methods," Papers 88, World Bank - Living Standards Measurement.
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    Cited by:
    1. David Coady & Susan Parker, 2009. "Targeting Social Transfers to the Poor in Mexico," IMF Working Papers 09/60, International Monetary Fund.
    2. John A. Maluccio, 2009. "Household targeting in practice: The Nicaraguan Red de Protección Social," Journal of International Development, John Wiley & Sons, Ltd., vol. 21(1), pages 1-23.
    3. Garcia-Diaz, Rocio & Sosa-Rub, Sandra G., 2011. "Analysis of the distributional impact of out-of-pocket health payments: Evidence from a public health insurance program for the poor in Mexico," Journal of Health Economics, Elsevier, vol. 30(4), pages 707-718, July.
    4. Chikako Yamauchi, 2010. "Community-Based Targeting and Initial Local Conditions: Evidence from Indonesia's IDT Program," Economic Development and Cultural Change, University of Chicago Press, vol. 59(1), pages 95-147, October.

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