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More for the poor is less for the poor : the politics of targeting

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  • Gelbach, Jonath B.
  • Pritchett, Lant H.

Abstract

Standard economic analyses suggests that when the budget for redistribution is fixed, transfers should be targeted to (that is, means-tested for) those most in need. But both economists and political scientists have long recognized the possibility that targeting could undermine political support for redistribution, and hence reduce the available budget. The authors formalize this recognition, developing a simple economy in which both nontargeted (universally received) and targeted transfers are available. The policymaker chooses the share of the budget to be spent on each type of transfer while the budget is determined through majority voting. Their results are striking. If the policymaker ignores political feasibility and assumes that the budget is fixed, she will choose full targeting of transfers -in the process minimizing social welfare and the utility of the poor. By contrast, when the policymaker recognizes budgetary endogeneity, she will choose zero targeting, spending theentire budget on the universally received transfer. Social welfare, the budget for redistribution, and the utility of poor agents are all maximized in the resulting equilibrium.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1799.

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Date of creation: 31 Jul 1997
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Handle: RePEc:wbk:wbrwps:1799

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Related research

Keywords: Environmental Economics&Policies; Services&Transfers to Poor; Health Economics&Finance; Economic Theory&Research; Poverty Impact Evaluation; Services&Transfers to Poor; Rural Poverty Reduction; Economic Theory&Research; Environmental Economics&Policies; Safety Nets and Transfers;

References

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  1. Nichols, Albert L & Zeckhauser, Richard J, 1982. "Targeting Transfers through Restrictions on Recipients," American Economic Review, American Economic Association, vol. 72(2), pages 372-77, May.
  2. Stern, Nicholas, 1982. "Optimum taxation with errors in administration," Journal of Public Economics, Elsevier, vol. 17(2), pages 181-211, March.
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Citations

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Cited by:
  1. Paul Shaffer, 2008. "New Thinking on Poverty: Implications for Globalisation and Poverty Reduction Strategies," Working Papers, United Nations, Department of Economics and Social Affairs 65, United Nations, Department of Economics and Social Affairs.
  2. Pritchett, Lant & Suryahadi, Asep & Sumarto, Sudarno, 2000. "Quantifying vulnerability to poverty - a proposed measure, applied to Indonesia," Policy Research Working Paper Series 2437, The World Bank.
  3. Gertler, Paul J., 1998. "On the road to social health insurance: the Asian experience," World Development, Elsevier, vol. 26(4), pages 717-732, April.
  4. Conning, Jonathan & Kevane, Michael, 2002. "Why isn't there more Financial Intermediation in Developing Countries?," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  5. Conning, Jonathan & Kevane, Michael, 2002. "Community-Based Targeting Mechanisms for Social Safety Nets: A Critical Review," World Development, Elsevier, vol. 30(3), pages 375-394, March.
  6. Marcelo Côrtes Neri & Marcelo Casal Xerez, 2004. "Aspectos Dinâmicos De Um Sistema De Metas Sociais," Anais do XXXII Encontro Nacional de Economia [Proceedings of the 32th Brazilian Economics Meeting], ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of G 055, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  7. Maloney, William F., 2001. "Evaluating emergency programs," Policy Research Working Paper Series 2728, The World Bank.
  8. World Bank, 2001. "India - Improving Household Food and Nutrition Security : Achievements and the Challenges Ahead, Volume 1. Main Report," World Bank Other Operational Studies 15516, The World Bank.
  9. Beck, Thorsten & Clarke, George & Groff, Alberto & Keefer, Philip & Walsh, Patrick, 2000. "New tools and new tests in comparative political economy - the database of political institutions," Policy Research Working Paper Series 2283, The World Bank.
  10. Berthold, Norbert & Thode, Eric, 2000. "Umverteilung in der Mittelschicht: notwendiges Übel im Kampf gegen Armut?," Wirtschaftswissenschaftliche Beiträge 34, Julius-Maximilians-Universität Würzburg, Lehrstuhl für Volkswirtschaftslehre, insbes. Wirtschaftsordnung und Sozialpolitik.
  11. Lundberg, Mattias & Over, Mead & Mujinja, Phare, 2000. "Sources of financial assistance for households suffering an adult death in Kagera, Tanzania," Policy Research Working Paper Series 2508, The World Bank.
  12. Azam, Jean-Paul & Laffont, Jean-Jacques, 2003. "Contracting for aid," Journal of Development Economics, Elsevier, vol. 70(1), pages 25-58, February.

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