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Targeting Revisited

Author: D van de Walle
Date: 1998
Size: 18 pages (110 KB)

Summary

It is often claimed that narrow targeting of the poor will allow governments to reduce poverty more effectively and at a lower cost than broadly targeted social sector spending programmes aimed at alleviating poverty. What are the hidden costs and benefits of broad and narrow targeting to the poor? Compiled for The World Bank Research Observer, this paper reviews the issues surrounding targeted programs in the light of new research and also points to continuing deficiencies in our knowledge.

It is argued that those who have been left behind by economic growth or who are vulnerable to risk can be reached most cost effectively by concentrating limited public resources on narrowly target groups within society. But narrow targeting often has hidden costs and, once these costs are considered, the most finely targeted policy may not have any more effect on poverty than a broadly targeted one.

Narrow targeting has received the bulk of attention, yet both approaches have benefits and costs to the poor.

Whilst no attempt is made to reach the poor as individuals, the basic principle underlying broad targeting is that some categories of public spending matter more to the poor than other categories.
In a pattern that is frequently repeated across developing countries, spending on primary education and health services tends to favour the poor.
No socio-economic distinctions are made between who can and cannot participate in broadly targeted programming, therefore it is perceived to be more politically popular and hence more sustainable.
Narrow targeting is defined as a deliberate attempt to concentrate benefits on poor people and has been a particularly popular policy proposal in the context of recent worldwide efforts to reduce budget deficits while still protecting the poor.
Leakage to the non-poor and higher administrative costs can eat into a programme’s budget rather than provide greater coverage of the poor.
Spending that is narrowly targeted on the poor tends to be associated with a contraction of benefits to the middle class, which is often the government’s most politically important constituency for supporting poverty reduction efforts.

Targeting will often be desirable, but it should not be prejudged. The motivation for narrow targeting is often that broad targeting is costly, especially because of leakage to the non-poor. In trying to target narrowly, however, hidden and often ignored costs can be created that wipe out the benefits, hence gains to the poor are frequently overestimated.

Once the practical difficulties of targeting the poor are acknowledged, it becomes easier to see that more attention needs to be paid to the timing and sequencing of macroeconomic operations in order to compensate losers in the short run.
Reasonably reliable short-cut methods need to be pursued side-by-side with more rigorous and costly evaluations as knowledge about both costs and benefits suffers from inadequacies in data and methods of analysis.
Targeted schemes should be designed so that incentives for escaping poverty are not destroyed.
Although the choice between broad or narrow targeting will vary, the two approaches will often be complementary, although the appropriate combination will differ across countries.
It is important that governments experiment with schemes that offer better incentives, carefully monitor the costs and outcomes and are flexible and pragmatic in their policy responses.

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Source: Van de Walle, D., 1998, ‘Targeting Revisited’, The World Bank Research Observer, vol 13, no 2, World Bank, Washington