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Are the Welfare Losses from Imperfect Targeting Important?

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  • EMMANUEL SKOUFIAS
  • DAVID P. COADY

Abstract

We quantify and compare the size of the welfare losses arising from the use of alternative ‘imperfect’ welfare indicators as substitutes for the conventionally preferred consumption indicator. We find that the size of the welfare losses associated with different indicators varies considerably. An asset‐based index and the share of food as targeting indicators were found to have the highest welfare losses relative to all other targeting indicators examined. Our preferred welfare index implies that the losses from the two best targeting indicators (i.e. reported expenditures and reported income) are statistically significant but very low (less than 5%).

Suggested Citation

  • Emmanuel Skoufias & David P. Coady, 2007. "Are the Welfare Losses from Imperfect Targeting Important?," Economica, London School of Economics and Political Science, vol. 74(296), pages 756-776, November.
    • Handle: RePEc:bla:econom:v:74:y:2007:i:296:p:756-776
    DOI: 10.1111/j.1468-0335.2006.00567.x
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