Public spending and the poor : what we know, what we need to know
Public spending aims to promote efficiency and equity. This paper, drawn from a book on public spending and the poor, is concerned with the latter. In it, the author focuses on three key questions: what is the welfare objective? how are the benefits of public spending currently distributed? how can that distribution be improved? The author says that one must be clear about how performance is to be judged. Different assumptions about policy objectives shape disagreements about program assessments and recommendations. Evaluating a policy's impact requires assessing how different things would have been without it, but quantifying a counterfactual is not easy. One approach - benefit incidence - ignores behavioral responses and second-round effects, and simply uses the cost of provision as a proxy for benefits received. Other methods focus entirely on the individual's valuation of the policy benefits, allowing for responses to changes in the individual's budget set. Some reasonably robust conclusions have emerged from studies of public spending incidence. One, spending on basic services - notably primary and secondary education and basic health care- almost universally reaches the poor. The case for broad targeting, by expanding the share of public spending on these services, is well-substantiated. But even here, monitoring is required so that marginal investments are not lavished on better serving the better-off. Two,certain food subsidy and distribution schemes, social cash transfers, public employment schemes, and other targeted transfer schemes have at times been quite propoor. Three, many programs whose stated rationale is to reduce poverty have instead been dismal, expensive failures. A popular reaction has been to clamor for reform of public spending, to demand finer targeting of benefits to the poor. Most public spending programs are to some degree"targeted."The question is, what degree of targeting is optimal? Other things being equal, the more ways one discriminates between beneficiaries, the greater targeting's impact on poverty. But other things are not equal. Fine targeting sometimes comes at a cost to the poor. Administrative costs may escalate, political support may vanish, and behavioral responses may add costs to targeted interventions. There is no simple answer about how much targeting is desirable, but empirical evidence frompast studies suggests some clear principles. The optimal mix of targeted and universal poverty-reduction programs depends on several factors, including the characteristics of the poor and country-specific circumstances. When poverty is widespread and administrative capacity is low, broad targeting is desirable and results from incidence of public spending studies should help guide sectoral and intrasectoral allocations. Generally, what is needed is a combination of universalism in certain spending categories and finer targeting in others. Such a two-pronged approach is a sound starting point for policy design. But in implementing it, one should never confuse the ends and the means of policy.
|Date of creation:||30 Jun 1995|
|Date of revision:|
|Contact details of provider:|| Postal: 1818 H Street, N.W., Washington, DC 20433|
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Datt, Gaurav & Ravallion, Martin, 1990. "Regional disparities, targeting, and poverty in India," Policy Research Working Paper Series 375, The World Bank.
- Cornes,Richard, 1992. "Duality and Modern Economics," Cambridge Books, Cambridge University Press, number 9780521336017, November.
- Ravallion, Martin, 1991. "Reaching the Rural Poor through Public Employment: Arguments, Evidence, and Lessons from South Asia," World Bank Research Observer, World Bank Group, vol. 6(2), pages 153-75, July.
- Haddad, L. & Kanbur, R., 1989.
"How Serious Is The Neglectof Intra-Household Inequality?,"
450, Stockholm - International Economic Studies.
- Haddad, Lawrence & Kanbur, Ravi, 1990. "How Serious Is the Neglect of Intra-Household Inequality?," Economic Journal, Royal Economic Society, vol. 100(402), pages 866-81, September.
- Haddad, Lawrence & Kanbur, Ravi, 1989. "How serious is the neglect of intrahousehold inequality ?," Policy Research Working Paper Series 296, The World Bank.
- Besley, Timothy, 1990. "Means Testing versus Universal Provision in Poverty Alleviation Programmes," Economica, London School of Economics and Political Science, vol. 57(225), pages 119-29, February.
- Pollak, R.A., 1990.
"Welfare Comparisons And Situations Comparisons,"
90-11, University of Washington, Department of Economics.
- Pollak, R.A., 1990. "Welfare Comparisons And Situations Comparisons," Discussion Papers in Economics at the University of Washington 90-11, Department of Economics at the University of Washington.
- Sen, Amartya K, 1979. "Personal Utilities and Public Judgements: Or What's Wrong with Welfare Economics?," Economic Journal, Royal Economic Society, vol. 89(355), pages 537-58, September.
- Rosenzweig, Mark R & Wolpin, Kenneth I, 1986. "Evaluating the Effects of Optimally Distributed Public Programs: ChildHealth and Family Planning Interventions," American Economic Review, American Economic Association, vol. 76(3), pages 470-82, June.
- Lipton, Michael & Ravallion, Martin, 1993.
"Poverty and policy,"
Policy Research Working Paper Series
1130, The World Bank.
- Lanjouw, Peter & Ravallion, Martin & DEC, 1994.
"Poverty and household size,"
Policy Research Working Paper Series
1332, The World Bank.
- Sudhir Anand & Martin Ravallion, 1993. "Human Development in Poor Countries: On the Role of Private Incomes and Public Services," Journal of Economic Perspectives, American Economic Association, vol. 7(1), pages 133-150, Winter.
- Boadway, R. & Marchand, M., .
"The use of public expenditures for redistributive purposes,"
CORE Discussion Papers RP
1131, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Boadway, Robin & Marchand, Maurice, 1995. "The Use of Public Expenditures for Redistributive Purposes," Oxford Economic Papers, Oxford University Press, vol. 47(1), pages 45-59, January.
- Boadway, R. & Marchand, M., 1990. "The use of public expenditures for distributive purposes," CORE Discussion Papers 1990066, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Binswanger, Hans P. & Khandker, Shahidur R. & Rosenzweig, Mark R., 1993.
"How infrastructure and financial institutions affect agricultural output and investment in India,"
Journal of Development Economics,
Elsevier, vol. 41(2), pages 337-366, August.
- Binswanger, Hans P. & Khandker, Shahidur R & Rosenzweig, Mark R., 1989. "How infrastructure and financial institutions affect agricultural output and investment in India," Policy Research Working Paper Series 163, The World Bank.
- Selden, Thomas M. & Wasylenko, Michael J., 1992. "Benefit incidence analysis in developing countries," Policy Research Working Paper Series 1015, The World Bank.
- King, Mervyn A., 1983. "Welfare analysis of tax reforms using household data," Journal of Public Economics, Elsevier, vol. 21(2), pages 183-214, July.
- Kanbur, Ravi & Haddad, Lawrence, 1990.
"Is there an intra household Kuznets curve? Some evidence from the Philippines,"
Policy Research Working Paper Series
466, The World Bank.
- Haddad, Lawrence & Kanbur, Ravi, 1992. "Is There an Intrahousehold Kuznets Curve? Some Evidence from the Philippines," Public Finance = Finances publiques, , vol. 47(Supplemen), pages 77-93.
- Haddad, L. & Kanbur, R., 1990. "Is There An Intra-Household Kuznets Curve? Some Evidence from the Philippines," Papers 101, Warwick - Development Economics Research Centre.
- Gertler, Paul & Locay, Luis & Sanderson, Warren, 1987.
"Are user fees regressive? : The welfare implications of health care financing proposals in Peru,"
Journal of Econometrics,
Elsevier, vol. 36(1-2), pages 67-88.
- Paul J. Gertler & Luis Locay & Warren C. Sanderson, 1987. "Are User Fees Regressive? The Welfare Implications of Health Care Financing Proposals in Peru," NBER Working Papers 2299, National Bureau of Economic Research, Inc.
- Deaton, Angus S & Muellbauer, John, 1986. "On Measuring Child Costs: With Applications to Poor Countries," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 720-44, August.
- Browning, Martin, 1992. "Children and Household Economic Behavior," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1434-75, September.
- Litvack, Jennie I. & Bodart, Claude, 1993. "User fees plus quality equals improved access to health care: Results of a field experiment in Cameroon," Social Science & Medicine, Elsevier, vol. 37(3), pages 369-383, August.
- McKenzie,George W., 1983. "Measuring Economic Welfare," Cambridge Books, Cambridge University Press, number 9780521248624, November.
- Gertler, P. & Glewwe, P., 1989. "The Willingness To Pay For Education In Developing Countries," Papers 54, World Bank - Living Standards Measurement.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:1476. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi)
If references are entirely missing, you can add them using this form.