Could the Behavioral Responses Justify the Absence of Direct Transfers to Fight Poverty in MENA Region?

Sami Bibi ()

No 396, Working Papers from Economic Research Forum

Abstract: While cash transfers through proxy means tests have increased over the last decade in Latin America to fight poverty, consumption subsidies remain the common form of redistributive income in most MENA countries. There may be many reasons for this such as their administrative costs, effects on labor supply and private transfers, and the absence of political support for more targeted programs. The literature offers several ex post approaches to capture the behavioral responses cost of implemented socio-demographic targeting transfers. In this paper, we suggest an ex ante approach to judge whether the behavioral incidence of counterfactual socio-demographic targeting transfers may explain the absence of this policy intervention. Our methodology is illustrated using a household survey from Tunisia and counterfactual direct transfers based upon socio-demographic targeting. The results suggest that poverty could be decreased robustly by adopting the counterfactual design even if it leads to stronger behavioral responses when compared to the consumption subsidy program. However, more targeted transfers will not automatically meet with the approval of the majority of citizens.

Pages: 21
Date: 2008-01-03, Revised 2008-01-03
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Published by The Economic Research Forum (ERF)

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