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Has the World Bank admitted defeat on poverty-targeting?

Inclusive social protection better targets

The World Bank’s competition to develop a tool for poverty-targeting, with a top prize of US$6,000, comes after decades of work and millions of dollars of investment by the World Bank in designing poverty-targeting mechanisms. Many of their staff have dedicated their best years to the task – and yet success has been minimal, writes Stephen Kidd.

The best they’ve managed to come up with is the proxy means test which, as we all know, generates very high errors and arbitrary selection. Nick Freeland’s recent paper on the social protection flaw offers a great overview of the challenges with targeting.

So is the launch of the targeting competition an admission of defeat? Has the World Bank decided that the task of identifying ‘the poor’ is beyond its capabilities? And have they realised that the rest of us may, in fact, be able to do a better job? I guess we couldn’t do any worse. It does, though, seem a little unfair. While they’ve spent an absolute fortune achieving failure, they are only willing to give the rest of us a few thousand dollars (and then only if we win).  Of course, if their aim with targeting were to minimise exclusion errors, there is a very easy answer. Just include everyone in a programme.

Universal benefits have an incredibly strong track record of success. Mongolia, for example, is well ahead of the World Bank in effectively reaching the poorest children with its universal child benefit, with almost no exclusion. The UK’s National Health Service is a universal benefit that is free at the point of entry for everyone. And, as the figure below shows, Georgia’s universal old age pension has been incredibly successful in reaching the country’s poorest older people. Less than one per cent of older people among the poorest 40 per cent are excluded, an incredibly effective targeting performance out-performing by far any poverty-targeting mechanism.

One reason for the World Bank’s failure is that is has been asking the wrong question. Instead of trying to reach ‘the poor,’ they’ve been attempting to target them. And there is a big difference between reaching and targeting. Reaching ‘the poor’ is an objective: it’s what we aim to achieve. In contrast, targeting ‘the poor’ is just a means to achieve the objective of reaching ‘the poor,’ and not a particularly effective one. If our aim is to reach ‘the poor,’ all the evidence suggests that an inclusive, universal approach is the most effective option. It may be more expensive than poverty-targeting, but that’s not a bad thing: as we’ve argued elsewhere, if countries want a Rolls-Royce social protection system, they have to be willing to pay for it. If not, they’re just going to have to accept the second-hand Lada model: a cheap, but ineffective, proxy means test (or some other failure, such as community-based targeting).

Anyway, my entry into the competition is universal selection. When do I get my $6,000?

Figure 1: Coverage of Georgia's old age pension across the consumption distribution. Source: Source: Secondary analysis of the 2013 Welfare Monitoring Survey.
Figure 1: Coverage of Georgia’s old age pension across the consumption distribution. Source: Source: Secondary analysis of the 2013 Welfare Monitoring Survey.

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