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A regional general equilibrium analysis of the welfare impact of cash transfers: an analysis of PROGRESA in Mexico

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  • Coady, David
  • Harris, Rebecca Lee

Abstract

Using a regionally disaggregated computable general equilibrium model, we analyze the differential welfare impacts of a cash transfer program targeted at rural areas. The direct effect of the transfers decreases regional income differentials, but the indirect effects depend on how the program is financed. Financing the program with a more efficient tax system is also less regressive and has favorable urban impacts. The less efficient instruments result in relatively higher incomes in all rural regions, but are more regressive. The increasing share of urban poverty highlights the shortcomings of rural targeting and raises the issue of horizontal equity.

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  • Coady, David & Harris, Rebecca Lee, 2001. "A regional general equilibrium analysis of the welfare impact of cash transfers: an analysis of PROGRESA in Mexico," TMD discussion papers 76, International Food Policy Research Institute (IFPRI).
    • Handle: RePEc:fpr:tmddps:76
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    File URL: https://hdl.handle.net/10568/158023
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    References listed on IDEAS

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    1. Ravallion, M., 1992. "Poverty Comparisons - A Guide to Concepts and Methods," Papers 88, World Bank - Living Standards Measurement.
    2. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production: I--Production Efficiency," American Economic Review, American Economic Association, vol. 61(1), pages 8-27, March.
    3. Peter A. Diamond & J. A. Mirrlees, 1968. "Optimal Taxation and Public Production," Working papers 22, Massachusetts Institute of Technology (MIT), Department of Economics.
    4. Harris, Rebecca Lee, 1999. "The distributional impact of macroeconomic shocks in Mexico: threshold effects in a multi-region CGE model," TMD discussion papers 44, International Food Policy Research Institute (IFPRI).
    5. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production II: Tax Rules," American Economic Review, American Economic Association, vol. 61(3), pages 261-278, June.
    6. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
    7. David Coady, 1997. "Agricultural Pricing Policies in Developing Countries: An Application to Pakistan," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 4(1), pages 39-57, January.
    8. Coady, David P. & Harris, Rebecca Lee, 2001. "Evaluating transfer programs within a general equilibrium framework," FCND briefs 110, International Food Policy Research Institute (IFPRI).
    9. Coady, David & Harris, Rebecca Lee, 2001. "Evaluating transfer programs within a general equilibrium framework," FCND discussion papers 110, International Food Policy Research Institute (IFPRI).
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    Cited by:

    1. Nikita Céspedes, 2014. "General Equilibrium Analysis of Conditional Cash Transfers," Working Papers 25, Peruvian Economic Association.
    2. Aykut Mert Yakut & Ebru Voyvoda, 2017. "Intertemporal CGE Analysis of Income Distribution in Turkey," ERC Working Papers 1703, ERC - Economic Research Center, Middle East Technical University, revised Feb 2017.
    3. Imane Helmy & Christian Richter & Khalid Siddig & Hebatallah Ghoneim, 2018. "A Comparison of the Economics Impacts of Conditional and Unconditional Cash Transfers in Egypt," Working Papers 50, The German University in Cairo, Faculty of Management Technology.

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