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Evaluating transfer programmes within a general equilibrium framework

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  • David P. Coady
  • Rebecca L. Harris

Abstract

We develop a general equilibrium model for evaluating domestically financed transfer programmes and derive analytical expressions which provide a framework for combining results from a computable general equilibrium model with disaggregated household data. We separate the welfare impact into three components, i.e. "redistribution", "reallocative", and "distortionary" effects. We show how these are subsumed within one parameter, the "cost of public funds". Using a Mexican programme for illustration, we show that substantial welfare gains result from a switch from universal food subsidies to targeted transfers, reflecting both the improved targeting efficiency of the latter and the relaxation the trade-off between equity and efficiency when designing tax systems. Copyright 2004 Royal Economic Society.

Suggested Citation

  • David P. Coady & Rebecca L. Harris, 2004. "Evaluating transfer programmes within a general equilibrium framework," Economic Journal, Royal Economic Society, vol. 114(498), pages 778-799, October.
    • Handle: RePEc:ecj:econjl:v:114:y:2004:i:498:p:778-799
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    Citations

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    Cited by:

    1. Coady, David P. & Parker, Susan W., 2005. "Program participation under means-testing and self-selection targeting methods," FCND discussion papers 191, International Food Policy Research Institute (IFPRI).
    2. Michael Christian Lehman, 2014. "Long-Run Effects Of Conditional Cash Transfers," Anais do XLI Encontro Nacional de Economia [Proceedings of the 41st Brazilian Economics Meeting] 223, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    3. Adato, Michelle & Hoddinott, John (ed.), 2010. "Conditional Cash Transfers in Latin America," IFPRI books, International Food Policy Research Institute (IFPRI), number 978-0-8018-9498-5.
    4. Paul A. Dorosh & Mr. David Coady & Bart Minten, 2008. "Evaluating Alternative Approaches to Poverty Alleviation: Rice Tariffs Versus Targeted Transfers in Madagascar," IMF Working Papers 2008/009, International Monetary Fund.
    5. Michael Lechner & Conny Wunsch, 2009. "Are Training Programs More Effective When Unemployment Is High?," Journal of Labor Economics, University of Chicago Press, vol. 27(4), pages 653-692, October.
    6. Vaqar Ahmed & Cathal O'Donoghue, 2010. "External Shocks in a Small Open Economy: A CGE - Microsimulation Analysis," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 15(1), pages 45-90, Jan-Jun.
    7. Dietrich, Stephan & Malerba, Daniele & Barrientos, Armando & Gassmann, Franziska, 2017. "Rates of return to antipoverty transfers in Uganda," MERIT Working Papers 2017-040, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    8. Anindya S. Chakrabarti & Abinash Mishra & Mohsen Mohaghegh, 2024. "Inequality and income mobility: the case of targeted and universal interventions in India," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 22(3), pages 781-807, September.
    9. Pushkar Maitra & Sandip Mitra & Dilip Mookherjee & Sujata Visaria, 2021. "Evaluating the Distributive Effects of a Development Intervention," HKUST CEP Working Papers Series 202106, HKUST Center for Economic Policy.
    10. Phouphet Kyophilavong & Xaignasack Lassachack & Thanouxay Volavong, 2016. "Do cash transfers help the poor during trade liberalization? Evidence from Laos," International Area Studies Review, Center for International Area Studies, Hankuk University of Foreign Studies, vol. 19(4), pages 355-371, December.
    11. Maitra, Pushkar & Mitra, Sandip & Mookherjee, Dilip & Visaria, Sujata, 2022. "Evaluating the distributive effects of a micro-credit intervention," Journal of Development Economics, Elsevier, vol. 158(C).
    12. Mr. David Coady & Susan Parker, 2009. "Targeting Social Transfers to the Poor in Mexico," IMF Working Papers 2009/060, International Monetary Fund.
    13. Jörg Peters & Jörg Langbein & Gareth Roberts, 2018. "Generalization in the Tropics – Development Policy, Randomized Controlled Trials, and External Validity," The World Bank Research Observer, World Bank, vol. 33(1), pages 34-64.
    14. Helmy, Imane & Ghoneim, Hebatallah & Siddig, Khalid, 2019. "Implementing Cash Transfer Programmes in Egypt Differently: An Economic Impact Analysis," Conference papers 333055, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    15. Le Blanc, David, 2005. "Economic evaluation of housing subsidy systems: a methodology with application to Morocco," Policy Research Working Paper Series 3529, The World Bank.
    16. Timilsina, Govinda R., 2007. "The role of revenue recycling schemes in environmental tax selection : a general equilibrium analysis," Policy Research Working Paper Series 4388, The World Bank.
    17. David P. Coady & Susan W. Parker, 2009. "Targeting Performance under Self-selection and Administrative Targeting Methods," Economic Development and Cultural Change, University of Chicago Press, vol. 57(3), pages 559-587, April.
    18. Alderman, Harold & Behrman, Jere R. & Tasneem, Afia, 2015. "The contribution of increased equity to the estimated social benefits from a transfer program: An illustration from PROGRESA:," IFPRI discussion papers 1475, International Food Policy Research Institute (IFPRI).
    19. Vanesa Jorda & Jose M. Alonso, 2020. "What works to mitigate and reduce relative (and absolute) inequality?: A systematic review," WIDER Working Paper Series wp-2020-152, World Institute for Development Economic Research (UNU-WIDER).

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