Optimal Income Support Targeting
AbstractThis paper considers the practical problem of distributing a fixed budget for poverty alleviation to a population whose poverty status is not directly observable. Some information on the relationship between poverty status and a number of observable and verifiable characteristics is assumed to be available in the form of a household survey. The solution we propose differs from other academic work in that it explicitly accounts for administrative constraints on the shape of the transfer function and is computationally more straightforward. It improves on the techniques that are commonly used in practice by taking both the concavity of the social welfare function and the entire conditional distribution of poverty status into account, and by endogenously determining the optimal transfer levels. Although the superiority of our allocation rule over other techniques is tautological, we explore the magnitude of the improvement in an artificial dataset. Finally, we provide an intuitive discussion of the defects of currently operational methods.
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Bibliographic InfoPaper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 41.
Date of creation: 01 Oct 2000
Date of revision:
targeting; discriminant analysis; poverty;
Other versions of this item:
- De Watchter, S. & Galiani, S., 2000. "Optimal Income Support Targeting," Economics Series Working Papers 9941, University of Oxford, Department of Economics.
- Sebastian Galiani & Stefan De Wachter, 2001. "Optimal Income Support Targeting," Working Papers 39, Universidad de San Andres, Departamento de Economia, revised Apr 2005.
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
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