Targeting social benefit programmes: badly targeted or targeting badly?

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How should we target social benefit and transfer programmes?

The effectiveness of social benefit programmes often hinge on one crucial question: how well are the benefits targeted? On one hand, the proponents of more targeting contend that income-testing has been hailed as the gold standard for ensuring that our finite fiscal resources reach those most in need. On the other hand, proponents of ‘universal’ approaches, argue that targeting is a inaccurate, expensive, and exclusionary.

In this short policy memo first produced during my time at the LSE, I use international evidence on targeting accuracy to argue that there 1. even ‘universal’ transfers need to use some type of targeting mechanism (i.e. categorical) and 2. that there is no ‘optimal’ targeting mechanisms – instead, the choice of targeting will depend on a mix of programme objectives, design choices, and country contexts.

The findings of this memo implies that for Malaysia to enhance the efficacy of its social benefit programs, a more nuanced approach is required to rethink its reliance on income-testing, exploring combinations of different targeting methods, improve work incentives at the margins, and making strategic design adjustments to reduce targeting errors and improve outcomes.

Download this policy memo

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