Poverty Budgeting -- LAC Norman Hicks Sector Manager, Poverty, LAC-PREM June 22, 2001

Social Programs Social programs, esp. safety nets, should expand during a recession as poverty is increasing. Evidence from Argentina and Mexico show just the opposite

Incidence vs. Coverage We tend to concentrate on the targeting efficiency of programs; e.g. what percent goes to poor Coverage is also important; e.g. what percent of poor people receive the program.

Argentina: Benefit Incidence of Government Social Assistance by Income Quintiles (%) Quintile Distribution of Households Receiving Assistance Public Benefits Public Public and Private First 47.2 29.5 45.0 Second 29.0 18.8 31.4 Third 15.0 9.8 22.0 Fourth 6.4 4.9 16.1 Fifth 2.4 1.4 9.8 Total 100.0 12.8 24.8 Poor 64.6 25.5 39.8 Non-poor 35.4 7.2 18.1 (a) Weighted by provincial government spending on social welfare Source: SIEMPRO, Social Development Survey, 1997, Includes food, cash and other forms of in kind assistance.

Distribution of Benefits Since the income share of the poor is very low, even a government program which provides proportional benefits, is pro-poor (benefits are a greater share of the income of the poor than the rich). Thus, a program which provides more benefits to the rich may not be regressive.

Quintile: I II III IV V total Expenditures: ARGENTINA:Total Social Expenditures and Taxes by Quintiles, Urban Argentina 1996 (percent of total) Quintile: I II III IV V total Expenditures: Social Sectors 29.8 18.8 21.7 16.8 13.0 100 Social Insurance 9.9 20.6 19.5 23.6 26.5 100 Total Social 21.8 19.5 20.8 19.5 18.4 100 Tax Distribution 7.1 10.7 14.9 20.1 47.2 100 Income Shares 4.0 8.4 13.2 21.2 53.2. 100

Clarification of Objectives Many social programs have a mix of objectives, or objectives are not clearly specified. Example: a scheme to provide payments to keep children in school is seen as a safety net, but actually is an education program.

Evaluation of Programs Social programs are often thought to be pro-poor but are often never evaluated Many programs have dubious benefits for poor (labor training), or do not fulfill stated objectives (nutrition). PRSPs: Define targets for poverty reduction, including sub-targets in health nutrition, education, infrastructure, etc.

PRSP --The Target Problem We want PRSPs to have targets concerning outcomes, or at least outputs, not inputs. We can control inputs (teachers, schools, roads built, water connected, etc.), but not outcomes. We hold governments responsible for reaching PRSP targets, but do not know the relationships between inputs and outcomes.

IDG goals complicate the problem…. We encourage countries to strive to reach IDG goals…but they may be unrealistic in many countries.. Halve extreme poverty by 2015 100% primary school enrollment Eliminate gender gap in enrollment Reduce child and infant mortality by 2/3rds Reduce maternal mortality by 3/4ths

We need… More humility….we really don’t know how to achieve PRSP/IDG goals, in many cases, and… More Research….evaluations of programs and studies on input/output relations… including optimum strategies.