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To Target or Not to Target? The cost efficiency of indicator-based targeting

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  • Houssou, Nazaire
  • Zeller, Manfred

Abstract

This paper assesses the cost efficiency of indicator-based targeting. Using household survey data from Malawi, we examine whether an indicator-based targeting of the poor is more target- and cost-efficient than the currently used mechanisms for targeting agricultural subsidy programs in the country. There is compelling evidence in favor of targeting Malawi’s poor based on the newly developed system. An indicator-based targeting system appears to be more target- and cost-efficient than the 2000/01 Starter Pack and the 2006/07 Agricultural Input Subsidy Program (AISP). While the Starter Pack and the AISP transferred about 50% of total transfer, under an indicator-based system, about 73% of transfers are delivered to the poor. Likewise, under an indicator-based system, the costs of leakage are cut down by more than 50% compared to Starter Pack and AISP. This work is prospectively relevant for Malawi as its policy makers reflect on improving the efficiency of the country’s pro-poor development programs. Likewise, the research can be applied in other countries with similar targeting problems.

Suggested Citation

  • Houssou, Nazaire & Zeller, Manfred, 2010. "To Target or Not to Target? The cost efficiency of indicator-based targeting," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61007, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea10:61007
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    File URL: http://purl.umn.edu/61007
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    References listed on IDEAS

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    1. Dorward, Andrew & Chirwa, Ephraim & Kelly, Valerie A. & Jayne, Thomas S. & Slater, Rachel & Boughton, Duncan, 2008. "Evaluation Of The 2006/7 Agricultural Input Subsidy Programme, Malawi. Final Report," Food Security Collaborative Working Papers 97143, Michigan State University, Department of Agricultural, Food, and Resource Economics.
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    More about this item

    Keywords

    Malawi; poverty targeting; validation tests; cost efficiency; development policy; Agricultural and Food Policy; Community/Rural/Urban Development; Food Security and Poverty; Political Economy; Research Methods/ Statistical Methods; C01; C13; I32;

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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