Program funding and design choices by the central government can greatly affect the targeting performance of decentralized social programs. The allocation to a province should depend on how successful it is at reaching the poor with the extra resources, rather than how poor it is. New measurement tools can help monitor performance with limited data.
National antipoverty programs often rely heavily on provincial governments. The center targets poor provinces in the hope that they will reach their own poor. Without successful intraprovincial targeting, however, even dramatic redistribution from rich to poor provinces can have little impact on poverty nationally.
However, data for assessing performance at provincial level are often far from ideal. Can a centralized government monitor the performance of decentralized social programs in reaching the poor when their benefit incidence is unobserved?
Ravallion shows that the poverty map and the corresponding spending allocation across geographic areas allow one to identify the latent differences in mean allocations to the poor versus the nonpoor. The national measure of targeting performance is also subgroup-decomposable.
Ravallion uses an application to an antipoverty program in Argentina (Trabajar II) to assess performance in reaching the poor and to measure the relative contributions to the program's performance—before and after reforms—of the center's provincial reallocation and decentralized targeting.
Funding and program design changes led to large gains for the poor, although with diverse performance across provinces.
Program funding and design choices by the central government can greatly affect the targeting performance of decentralized social programs. The allocation to a province should depend on how successful it is at reaching the poor with the extra resources, rather than how poor it is.
Design choices should provide incentives for provincial governments to target resources to the poor. Finding feasible ways to monitor their performance and adjust central government's efforts accordingly are then crucial to better outcomes for poor people.
This paper—a product of Poverty and Human Resources, Development Research Group—is part of a larger effort in the group to provide better tools for monitoring the impact on poverty of World Bank projects. The study was funded by the Bank's Research Support Budget under research project "Policies for Poor Areas" (RPO 681-39). Copies of this paper are available free from the World Bank, 1818 H Street NW, Washington, DC 20433. Please contact Patricia Sader, room MC3-632, telephone 202-473-3902, fax 202-522-1153, Internet address psader@worldbank.org. The author may be contacted at mravallion@worldbank.org. (25 pages)
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