Targeting

The main objective of targeting is to deliver more resources to the poorest groups of the population.  Targeting is a tool that has costs and benefits.  Decisions about whether to target, how precise to be and what method to use will depend on the relative size of these costs and benefits, which will vary by setting.

Good evidence indicates that, for the most part, programs can focus resources on the poor to a moderate or high degree without incurring unacceptably high errors of exclusion and administrative, private costs, and/or incentive costs, although not all do so. Factoring in judgments on social and political costs is harder, partly because their metrics are so different, and partly because discussions about them are often more polemical than quantitative, but the widespread and increasing interest in targeting from policy makers suggests that these costs are not preclusive. Targeting performance appears to be better in countries with higher incomes and greater voice and accountability.  It is also better in countries with higher levels of income inequality.  The comparative results suggest the prime importance of implementation in good targeting

 A few methods of targeting and types of programs go hand-in-hand, for example, self-selection and commodity price subsidies. However, several different methods can often be used for a particular type of program; for instance, cash and food transfers can be targeted by means tests, proxy means tests, nutritional status or risk factors, geographic area, demographic characteristic, or self-selection. For a single program to use a number of methods is common and usually yields better targeting than a single method. Means tests and proxy means tests have the highest costs, but tend to produce the lowest errors of inclusion and are often good investments. Self-selection via a low wage rate and geographic targeting are also powerful and proven targeting tools.

The details and quality of implementation will have a significant effect on targeting outcomes. Programs need extensive outreach to keep errors of exclusion low. Reducing errors of inclusion requires a definition of eligibility that sorts the poor from the nonpoor well and can be implemented at a tolerable cost. Targeting systems should be dynamic, allowing new or newly poor households to access the program and moving out households that are no longer eligible.

A good household targeting system may be complex to develop, but can be used for many programs, not only for direct transfers in cash or in kind, but for entry into programs that provide free or subsidized health care, schooling, training, housing, utilities, and the like. The shared overhead is not only efficient, but can lead to a more coherent overall social policy.