Optimal Income Support Targeting
This paper considers the practical problem of distributing a fixed budget for poverty alleviation to a population whose poverty status is not directly observable. The solution we propose 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. We provide an algorithm to calculate the optimal transfers for any population of benefit applicants. Finally, we explain how our method is a generalization of statistical classification techniques and thus provide an intuitive discussion of the defects of currently operational methods.
|Date of creation:||Sep 2001|
|Date of revision:||Apr 2005|
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- Datt, Gaurav & Ravallion, Martin, 1990. "Regional disparities, targeting, and poverty in India," Policy Research Working Paper Series 375, The World Bank.
- Chesher, Andrew & Schluter, Christian, 2002.
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- Chaudhuri, Shubham & Ravallion, Martin, 1994. "How well do static indicators identify the chronically poor?," Journal of Public Economics, Elsevier, vol. 53(3), pages 367-394, March.
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- Ravallion, Martin & Sen, Binayak, 1994. "Impacts on rural poverty of land-based targeting: Further results for Bangladesh," World Development, Elsevier, vol. 22(6), pages 823-838, June.
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- Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-66, May.
- Glewwe, Paul, 1992. "Targeting assistance to the poor : Efficient allocation of transfers when household income is not observed," Journal of Development Economics, Elsevier, vol. 38(2), pages 297-321, April.
- Kanbur, R. & Keen, M., 1988. "Poverty, Incentives And Linear Income Taxation," The Warwick Economics Research Paper Series (TWERPS) 298, University of Warwick, Department of Economics.
- Elbers, Chris & Lanjouw, Jean O. & Lanjouw, Peter, 2002. "Micro-level estimation of welfare," Policy Research Working Paper Series 2911, The World Bank.
- Kanbur, Ravi & Keen, Michael & Tuomala, Matti, 1994. "Labor Supply and Targeting in Poverty Alleviation Programs," World Bank Economic Review, World Bank Group, vol. 8(2), pages 191-211, May.
- Besley, Timothy J & Kanbur, S M Ravi, 1988. "Food Subsidies and Poverty Alleviation," Economic Journal, Royal Economic Society, vol. 98(392), pages 701-19, September.
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