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Econ 313 > Poverty and Inequality P2: Targeting and Policies > Flashcards

Poverty and Inequality P2: Targeting and Policies Flashcards

1
Q

Anti-Poverty Policy:

Objectives:

A

Objective: (1) maximize coverage and (2) minimize leakage

What is it?

Designed policy specifically aimed at reducing poverty among beneficiaries

Trade-Offs Consider:

  1. Equity vs. Efficiency
  2. Administrative costs versus Asymmetric information
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2
Q

Anti-Poverty Policy:

Issues: (Name)

A
  1. Assymetic Information Problem
  2. Costs
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3
Q

Anti-Poverty Policy Issues

Issues with Assymetric Information:

A

I. Adverse selection (attract non-poor)

II. Moral hazard (transfer may alter behavior → incentive to not work possibly

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4
Q

Anti-Poverty Policy Issues

Problem and Types of Cost:

A

I. Administrative Costs:
- - Universal income may be easist (from this pov)
- Costs for government and the poor (forms, travel, stigma)

Options: (a) Hire data people for surveys and have a good tax system (expensive) or (b) have people self-declare → Assymetric informaton issue

II. Incentive Costs

  • Can incentivize overestimating poverty line: say more poor to get money
  • Not want incentives where non-poor act poor for money (efficiency concerns)

III. Political Economy Costs

  • Tax payers would have to pay policy
  • Citizens want to minimize own tax

Equity vs. Efficiency issues
Minimize: locate benefit offices closest to those who need them

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5
Q

Anti-Poverty Policy:

Mechanisms: (3)

A
  1. Indicators:Based on characterisitics (income, age, gender, disabilitied, thatched roof)
    • means testing
    • But strong incentive effects
  2. Self-Targeting:Self-Identifying (workfare, placement of benefits office, food subsidies)
  3. Participatory wealth ranking:(Community-based)Rank selves, who deserved transfer
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6
Q

Targeting

Types of Targeting:

A
  1. Perfect Targeting
  2. Universal Program
  3. Mixed Program
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7
Q

Types of Targeting

Perfect Targeting:

A

Identify every y below z and put on z (the poverty gap)

Financing: Non-poor see reduction post-transfer income

Then, if a lot of poor and few taxpayers → hard to do

Note: (costly)

  1. Administratively costly
  2. Incentive effects (in they stop working → total transfer goes up)
  3. Need good tax system
  4. Political costs
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8
Q

Types of Targeting

Universal Program

A

Give everybody the poverty line redarless of z

This will eliminate poverty (not inequality)

Notes:

  1. Fewer disincentives effects (none)
  2. Admin costs low
  3. No need good tax system
  4. (Bad) Total costs very high
  5. (Bad) How to finance this??
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9
Q

Types of Targeting

Mixed Program

A

- Reduce indincentive effects
- Help those close (not below poverty line)

| Q those below the poverty line → give z - Z(y) - function of income

## Footnote

Notes:

1. Admin costs lower (relative)
2. Possible incentives low
3. Need good tax system
4. Total costs: between perfect and universal

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10
Q

Types of Targeting

Where to get the money?

A

Where to get the money? (Biggest issue)

  • Loans (internationally) → not sustainable
  • Foreign aid

🧙🏼 Huge natural resource deposits → revenue expropriate to funding (note: corruption issue)

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11
Q

Cash Transfers

Why cash transfers?

And debates:

A

Why cash transfers? Income support most needy

Debates:

  1. Universal vs Targeted
  2. Conditional vs. Unconditional
  3. Administrative vs Incentive costs
    - Large debate in econ < larger debate in politics

🧙 Evidence (especially from Global South) of positive effects of CTs on well-being

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12
Q

Cash transfers

Mechanisms:

A

CTs efficient if help solve market failure

Two forms:

  • Externalities → underinvest in children’s health and schooling
  • Intra-household decision-making → decisions nnot reflect women’s and children’s interests

Then, cash transfers:

  • Externalities → Make conditonal on education and health
  • Intra-Household decisions → Empower women by targeting them with transfer
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13
Q

Conditional Cash Transfers (Study)

PROGRESA:

A
  • “Protype” → PROGRESAMexico(subsequently: OPORTUNIDADES)Conditions: (1) children attend school and (2) regular health checksTypically givenn motherExpectations:
    1. Improve schooling
    2. Improve health
    3. Increase women’s empowerment

Based on Sustainable Development Goals:
- Give money to mother: Development Goal #5

  • Conditional attending school and health checks: Development Goals #4 and #2
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14
Q

Conditonal Cash Transfers

Pros and Cons

A

Pros:

  • Deals disincentive effects
  • Direct linked outcomes donors care about

Cons:

  • Seen parternalistic
  • More administratively costly (collection info and infrustructure costs)
  • Sub-optimal for households compared to unconditional
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15
Q

Conditional Cash Transfers

Evidence

A
  1. Improves schooling and health
  2. Delayed fertility for adolesent girls
  3. (New) Reduce adult and child mortality (especially for children and women)
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16
Q

Conditional Cash transfers

Non-Targeted Consequences

A
  • Effects women’s empowerment?
  • Effects marital outcomes?Increase discourse violence, disillusionment or money leave toxic relationship?
  • Effects fertility parents?
  • Effects maternal oucome?Decrease num childrenWhy? (1) empowerment and (2) increased access to health services relating to fertility choices
  • General Equilibrium effects?Some evidence for inflation
17
Q

Universal Cash transfers

What are they?

Problems need to solve?

A
  1. Large enough cover basic living expenses alone
  2. Slow/no-phase out
  3. Untargeted, available large population

Problems need to solve:

  1. Robotization (increased inequality and labour income stagnation)
  2. Welfare traps in existing programs
  3. Existing programs not reach all needy groups (characterization hard)

Note: Not even (almost) viable for developing countries because of the lack of physical capacity

“Basic Income” ⇒ Meet basic needs and could be poverty line

“Universal” ⇒ Everyone gets it (no targeting) and unconditional (0-1 participation in labor force)

18
Q

Universal Cash Transfers

Biggest issues need to solve?

And debate

A

Biggest Issue: FINANCING

Debate:

  • Theory vs evidence
  • Rigerous evidence lacking
  • General equilibrium effects?
19
Q

Unconditional Cash Transfers

What are they?

A
  • CCTs critized parternalistic
  • Families know best
  • Administratively less costly
20
Q

Unconditional Cash Transfers (Study)

Haushoferand and Shapiro (2016)

A
  • NGO pairing: give directly
  • Randomized control trail in western Kenya (2011-2013)
    1. T1: Randomize wife/husband
    2. T2: Lum sum/ 9 monthly payments
    3. T3: Size payment

Targetting based on living under thatched roof

Results:

  • Invest more (home improvements, change roof)
  • Consume more (food and education)
  • Less hungry
  • No effect alcohol and tobacco consumption
  • Increased psychological wellbeing
  • Reduced poverty
21
Q

Unconditional Cash Transfers (study)

Malawi

A
  • Malawi

Q: What effect of cash and conditional on outcome (school)?

Q: What effect delaying marriage and child rearing?

Expect: (1) increased labor market participation, (2) better health, (3) better material outcomes, (4) more empowerment household, (5) greater economic growth

---

  • Unconditional only small dropout rate decrease → conditional better
    • Conditional: better scores
    However, marriage and pregency less in unconditional (less incentive for financial reasons)

Econ 313 (4 decks)

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