Evaluating the Impact of Government Programs on Social Welfare: The Role of Targeting and the Allocation Rules Among Program Beneficiaries

Abstract

A framework is provided for assessing the impact of social programs on welfare using two summary statistics: the mean benefit of the program and a distributional term (the Gini income elasticity of the program). The distributional term is itself decomposed into two components. The first component measures the targeting performance of the program, that is, who is participating and who is not. The second component measures the impact of the allocation rules for the distribution of the benefits among program participants. To help compare different programs, lower and upper bounds are provided for the two components of the distributional terms. Sensitivity analysis with respect to alternative formulations of the social welfare function is performed by using the (extended) Gini income elasticity. The framework is applied to data for three Latin American countries.

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