Efficient allocation of transfers to the poor: the problem of unobserved household income

To provide assistance to the poor, governments must know who the poor are, but in large, modern societies, it is not always easy to identify them. Governments with limited resources must be careful not to mistakenly target unneeded assistance to the nonpoor, who may attempt to gain benefits by misrepresenting their income. This report examines how governments and assistance agencies can effectively target direct transfers, such as money, food stamps, and rations to the poor. It addresses two primary issues: how to determine which households should receive transfers, given that reliable information on income is difficult to obtain; and how to determine the amount of the transfer for each household. The authors present a targeting method that uses household survey data, and apply this technique to both urban and rural areas in the Cote d'Ivoire. -from Publisher