Abel Gwaindepi g11g4344 Nchimunya Hamukoma g08h2351 Adelaide Hirwe g08h3258 Summary of Targeting Revisited by D.

Van De Walle

The following is a summary of the paper Targeting Revisited by D.Van De Walle. The paper starts off by asking, what is the most efficient method of using public spending to achieve certain goals given its limited resources? The answer provided is, targeting. Targeting is the process through which limited public goods are concentrated on defined groups in society. This process can be further broken up in the categories of Broad and Narrow Targeting. Broad Targeting targets the types of spending that is important to the poor as a collective without any attempt to help them as individuals, examples of this are spending on primary education and primary healthcare. It is a more politically acceptable strategy and as such is a more sustainable policy. The main criticisms of Broad Targeting however, is that it is expensive and leads to leakages as it can provide free resources to those who can afford to pay. Narrow Targeting is a process through which an attempt is made to directly influence the lives of the poor as individuals examples of this would be food stamps and microcredit facilities to low income individuals. Two principles are generally used in Narrow Targeting , categorical targeting whereby certain characteristics of poverty are targeted and self identification whereby the poor are encouraged to self identify in order to gain aid. Both Narrow and Broad Targeting have varying costs and benefits. However, the paper focuses on the costs and benefits of Narrow Targeting. These costs are divided into administrative costs, costs from incentive effect, behavioural costs and costs from ramification of political policy. Administration costs are the costs of the day to day running of the welfare program and the money that it takes for the funding to reach the poor. Costs from incentive effects refers to the way in which people alter their behaviour in response to policy, either in order to receive the transfer or after the transfer has been received. Change in political policy is often caused by successful lobbying from the most powerful groups in society. In most cases this is the middleclass, this proves a problem for narrowly targeted policies as the middleclass are often the first group to lose out on a transfer. Many of the overall benefits of targeting are difficult to measure because of their nature as well as because of the research methods used. However, one of the main benefits of Narrow Targeting is that it allows more direct access to the poor.

The Indian case study provides a brief overview of two policies implemented in India. The first is the Employment Guarantee Scheme whereby the poor were given the option of temporary employment by showing up to work on public works. This programme was very successful as it managed to smooth the consumption of the vulnerable in trying economic times. The system was also better targeted and less corrupt than previous programmes as it took power away from the administrators into the hands of the people. A Subsidized Credit Program implemented was far less successful as it led to individuals understating income to get the loan and created the space for patronage relations. In conclusion, successful targeting programs require a carefully designed policy that takes into account means testing and administrative costs. Both Broad and Narrow targeting have costs to the poor however, the costs of Narrow Targeting are often more hidden than the costs of Broad Targeting. So the choice between the two remains unclear. Targeting should not destroy the incentives for escaping poverty and there needs to be more policy towards preventing as opposed to managing poverty.