Targeting the poor

Targeting the poor

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  Targeting the Poor:Evidence from a Field Experiment in Indonesia Alatas, Banerjee, Hanna, Olken and Tobias American Economic Review 2012, 102(4):12061240
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  Agenda
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  Background The Direct CashAssistance (BLT) program was launched in 2005 to support poor households during economic crisis.  How to find an appropriate approach to target the poor.  Reports an experiment on three approaches: proxy means tests (PMT), community targeting, and a hybrid. 
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  Proxy Means Test(PMT) Assets (as proxy) are used to predict consumption or income  Frequently being used to the selection of the beneficiaries in a targeted social safety net programs.  Only those with incomes below a certain threshold are eligible.  The presumption is that household assets are harder to conceal from government surveyors than income. 
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  Community-Based The government allowsthe community or some part of it to select the beneficiaries.  The presumption is that wealth is harder to hide from one’s neighbors than from the government. 
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  Hybrid Combines PMT withcommunity-based method.  Aims to take advantage of the relative benefits of both methods. 
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  I. Empirical Design Setting Indonesia  Cash transfers US$10 (BLT Programs)  Combination of PMT with community-based methods  Goal: the poorest one-third of households.  45% of funds were incorrectly provided to non poor households; 47% of the poor were excluded from the program in 2005-2006 (World Bank:2006)
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  I. Empirical Design Sample: 3provinces 640 villages 30% urban 70% rural North Sumatra South Sulawesi Central Java Experimental design  Treatment for PMT  Treatment for Community Targeting  Treatment for Hybrid
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  II. Describing theData Data Collection Four main sources of data: Baseline data •demographics •Family networks •Participation in community activities •Relationships with local leaders •Access to existing social transfer programs •Households’ pe capita consumption Data on treatment results •Targeting rank list Data on community meeting •Attendance list •Questionnaire on perceptions of community’s interest and satisfaction level Data on community satisfaction •Suggestion boxes •Subvillage head interviews •Facilitator feedback •Households interview
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  II. Describing theData Summary Statistics 32%: incorrectly targeted based on consumption 20% of non poor households received cash transfer 53% of the poor excluded
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  III. Comparing theMethods Results on Targeting Performance and Satisfaction o Targeting Performance Based on Per Capita Consumption PMT method outperforms both the community and hybrid treatment in terms of the consumption based error rate. o Effects of Targeting Policy on Poverty Rate and Gap - The differences in targeting accuracy across the three methods do not result in large differences in the measures of poverty under consideration. - Community treatments do better at reducing the poverty headcount (from 15.64 to 13.68) - The poverty gap is not significantly different among he three methods.
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  o Satisfaction Data collection:end line household survey, follow up survey of sub village heads, and comment box, community’s complaints, facilitator comments. Results: Individuals and sub village heads are much more satisfied with the community treatment. Fewer complaints in the community treatments.
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  IV. Elite Capture Examiningwhether elite connected households are more likely to be beneficiaries when the elite have more control of the process  Result: the elite capture is not the reason that the targeting is worse under the community method. 
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  V. Community Effort • • • Worsetargeting in the community methods could result simply from fatigue as a the ranking progresses. To investigate, they randomized the order in which households were ranked and did regression. Results: the community treatment does slightly better than the PMT in the beginning but substantially worse towards the end.
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  VI. Testing theMaximand The community is doing its best to identify the poor, but has a different concept of poverty.  Investigated by examining how the targeting outcomes compare not just against the government’s metric of welfare, but also against alternative welfare metrics (community, sub village head, and self-assessment survey ranks)  Results:  Per capita consumption does not fully capture what the community calls welfare. The community and the elite broadly share the assessments of welfare The community targeting methods are more likely to conform with individual’s self-identified welfare status.
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  Does the communitylack information to evaluate consumption? Community has residual information about consumption beyond that contained in the PMT score or even in the PMT variables. Community has most of the information in the PMT as well, but choose to aggregate it in different way.
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  A different viewof individual welfare  People believe that there are household economies of scale, so that conditional on per capita consumption.  The community may know more about other households’ ability to smooth shocks.  No evidence that ethnic minorities are more likely to be ranked as poor.  Those who contribute money are likely to be ranked as richer.  Communities may try to provide the “right” incentives to households.  Village does not penalize those who spend a lot of money on smoking and drinking
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  Conclusion      The community seemsto have widely shared objective function other than per capita consumption; The objective function does not differ based on elite capture; There are better understanding of factors that affect a household’s earning potential or vulnerability. If targeting the poor based on consumption is the only objective, the PMT performs better than community methods. Community does better at identifying the poor.
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  Thank You forListening