To target or not to target? The costs, benefits, and impacts of indicator-based targeting

Publication year: 2011
Source: Food Policy, In Press, Corrected Proof, Available online 14 June 2011

Nazaire, Houssou , Manfred, Zeller

This paper assesses the cost-effectiveness of indicator-based targeting. Using household survey data from Malawi, we examine whether an indicator-based system is more target and cost-efficient in reaching the poor than universal systems and the currently used mechanisms for targeting agricultural subsidies in the country.Estimation results suggest that targeting Malawi’s poor and smallholder farmers with indicator-based systems may be worth the extra effort and may improve program targeting and cost efficiency. Even though under the proposed system administrative costs increase, simulation results indicate that it does not make a targeted program cost-ineffective. More importantly, the proposed system appears to be more…

 Highlights: ► Indicator-based targeting of the poor may improve program efficiency. ► An indicator-based targeting system improves the transfers to the poor. ► Leakage rates can be substantially reduced under an indicator-based targeting system. ► Improvements to targeting are possible only if programs are fairly well implemented.