Unconditional cash transfers in China : an analysis of the rural minimum living standard guarantee program

This paper examines China?s rural minimum living standard guarantee (dibao) program, one of the largest minimum income cash transfer schemes in the world. Using household survey data matched with published administrative data, the paper describes the dibao program, estimates the program?s impact on poverty, and carries out targeting analysis. The analysis finds that the program provides sufficient income to poor beneficiaries but does not substantially reduce the overall level of poverty, in part because the number of beneficiaries is small relative to the number of poor. Conventional targeting analysis reveals rather large inclusionary and exclusionary targeting errors; propensity score targeting analysis yields smaller but still large targeting errors. Simulations of possible reforms to the dibao program indicate that expanding coverage can potentially yield greater poverty reduction than increasing transfer amounts. In addition, replacing locally diverse dibao lines with a nationally uniform dibao threshold could in theory reduce poverty. The potential gains in poverty reduction, however, depend on the effectiveness of targeting.