Five criteria for choosing among poverty programs

Margaret E. Grosh

No 1201, Policy Research Working Paper Series from The World Bank

Abstract: The author addresses the issue of how to choose among discreet poverty interventions such as food stamp programs, public works, or small enterprise credit schemes where little formal policy modeling is done prior to decisionmaking. The minimum criteria on which to judge the relative merits of poverty programs are the following. Administrative feasibility. This depends on the detailed designof the program, the level of resources available for administration, and the degree of imperfection that can be tolerated. Political feasibility. This depends on how the program is promoted to the public, how coalitions of supporters or detractors are built, and the relative power of beneficiaries, suppliers, and administrators. Collateral effects on the poverty strategy. How will a safety net program affect, for example, the participants'labor supply, participation in other programs, and receipt of private interhousehold transfers, and how will those changes affect markets and government finances? What will be the net effect on poverty reduction. Potential for targeting the poor. Will the program reach significant number of the poor? How much leakage of benefits will there be to the nonpoor? Tailoring the solution to the problem. The program choice should address the real problem. Where the poor have suffered a loss of real wages rather than a loss of jobs, for example, transfers to the working poor may be more relevant than creating jobs. This criterion may seem obvious, but many proposals seem to ignore it. The author illustrates her main points by applying these criteria to a range of poverty programs commonly used in Latin America. General subsidies of food prices, for example, are administratively and politically feasible and lower food costs to the consumer, but they may distort the economy, harming growth. Food stamps are easy to target to the poor, are fairly difficult to administer, depending on program design, but depending on program design, may encourage the use of schools and primary health care. But there is controversy about whether they encourage dependency and diminish the work ethic.

Keywords: Rural Poverty Reduction; Environmental Economics&Policies; Health Economics&Finance; Services&Transfers to Poor; Safety Nets and Transfers (search for similar items in EconPapers)
Date: 1993-10-31
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