3/24/2024 0 Comments La household budget exampleWe use panel data for a random sample of households in the Colombian government’s social registry. We document the advantages and disadvantages of four different approaches to targeting for a hypothetical program that aims to provide cash transfers to households with income below the extreme poverty line. Incorporating information on shocks into traditional methods of selecting beneficiaries allows cash transfer programs to serve the purposes of traditional anti-poverty programs and provide a kind of unemployment insurance for low-income families. At the family level, they may cause job losses, deaths or illness. At the systemic level, shocks can be due to economic crisis, pandemics, and natural disasters. We show that while no panacea exists, a dynamic and flexible method that incorporates high frequency data on economic shocks can improve targeting at a reasonable cost during an economic crisis. In a recent paper we evaluate four methods of selecting beneficiaries for a cash transfer program. The challenge of selecting beneficiaries for cash transfers during crises thus becomes critical, especially in Latin America and the Caribbean where more than half the population works in the informal sector without unemployment insurance and even people who work in the formal sector may lack adequate protection. Governments, meanwhile, need to know how to adjust the social safety net without breaking the budget. During economic crises, such as the COVID-19 pandemic, many households that were not previously in poverty find themselves slipping into poverty, in desperate need of government transfers to pull them back out. While many of these programs have been highly successful at tackling long-term poverty, incomes fluctuate due to economic shocks and the target population of social programs move. In recent decades, dozens of countries around the world have adopted cash transfer programs to combat poverty and prevent it from being passed from generation to generation.
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