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

  • David Coady

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    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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    Article provided by Springer & International Institute of Public Finance 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
    DOI: 10.1007/s10797-006-4824-2
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    1. 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.
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    7. Angus Deaton & Salman Zaidi, 1999. "Guidelines for Constructing Consumption Aggregates For Welfare Analysis," Working Papers 217, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
    8. 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.
    9. Lanjouw, Peter & Ravallion, Martin, 1995. "Poverty and Household Size," Economic Journal, Royal Economic Society, vol. 105(433), pages 1415-34, November.
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    12. Sandmo, Agnar, 1976. "Optimal taxation : An introduction to the literature," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 37-54.
    13. 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.
    14. Auerbach, Alan J., 1985. "The theory of excess burden and optimal taxation," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 1, chapter 2, pages 61-127 Elsevier.
    15. 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.
    16. David Coady & Jean Drèze, 2002. "Commodity Taxation and Social Welfare: The Generalized Ramsey Rule," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 9(3), pages 295-316, May.
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