1. Targeting the Poor: Evidence
from a Field Experiment in
Indonesia
Alatas, Banerjee, Hanna, Olken and Tobias
American Economic Review 2012, 102(4):12061240

2. Agenda

3. Background
The Direct Cash Assistance (BLT)
program was launched in 2005 to
support poor households during
economic crisis.
 How to find an appropriate approach
to target the poor.
 Reports an experiment on three
approaches: proxy means tests
(PMT), community targeting, and a
hybrid.


4. Proxy Means Test (PMT)
Assets (as proxy) are used to predict
consumption or income
 Frequently being used to the selection
of the beneficiaries in a targeted social
safety net programs.
 Only those with incomes below a
certain threshold are eligible.
 The presumption is that household
assets are harder to conceal from
government surveyors than income.


5. Community-Based
The government allows the community
or some part of it to select the
beneficiaries.
 The presumption is that wealth is
harder to hide from one’s neighbors
than from the government.


6. Hybrid
Combines PMT with community-based
method.
 Aims to take advantage of the relative
benefits of both methods.


7. I. Empirical Design
Setting
 Indonesia
 Cash transfers US$10 (BLT Programs)
 Combination of PMT with community-based
methods
 Goal: the poorest one-third of households.
 45% of funds were incorrectly provided to non
poor households; 47% of the poor were
excluded from the program in 2005-2006
(World Bank:2006)

8. I. Empirical Design
Sample:
3 provinces
640 villages
30% urban
70% rural
North Sumatra
South Sulawesi
Central Java
Experimental design
 Treatment for PMT
 Treatment for Community Targeting
 Treatment for Hybrid

9. II. Describing the Data
Data Collection
Four main sources of data:
Baseline data
•demographics
•Family networks
•Participation in
community
activities
•Relationships with
local leaders
•Access to existing
social transfer
programs
•Households’ pe
capita
consumption
Data on treatment
results
•Targeting rank list
Data on
community
meeting
•Attendance list
•Questionnaire on
perceptions of
community’s
interest and
satisfaction level
Data on
community
satisfaction
•Suggestion boxes
•Subvillage head
interviews
•Facilitator
feedback
•Households
interview

10. II. Describing the Data
Summary Statistics
32%: incorrectly
targeted based
on consumption
20% of non poor
households
received cash
transfer
53% of the poor
excluded

11. III. Comparing the Methods
Results on Targeting
Performance and Satisfaction
o
Targeting Performance Based on Per Capita
Consumption
PMT method outperforms both the community and
hybrid treatment in terms of the consumption based
error rate.
o
Effects of Targeting Policy on Poverty Rate
and Gap
- The differences in targeting accuracy across the
three methods do not result in large differences in
the measures of poverty under consideration.
- Community treatments do better at reducing the
poverty headcount (from 15.64 to 13.68)
- The poverty gap is not significantly different
among he three methods.

12. o Satisfaction
Data collection: end line household
survey, follow up survey of sub village
heads, and comment box, community’s
complaints, facilitator comments.
Results:
Individuals and sub village heads are
much more satisfied with the community
treatment.
Fewer complaints in the community
treatments.

13. IV. Elite Capture
Examining whether elite connected
households are more likely to be
beneficiaries when the elite have more
control of the process
 Result: the elite capture is not the
reason that the targeting is worse
under the community method.


14. V. Community Effort
•
•
•
Worse targeting in the community
methods could result simply from
fatigue as a the ranking progresses.
To investigate, they randomized the
order in which households were
ranked and did regression.
Results: the community treatment
does slightly better than the PMT in
the beginning but substantially worse
towards the end.

15. VI. Testing the Maximand
The community is doing its best to identify the
poor, but has a different concept of poverty.
 Investigated by examining how the targeting
outcomes compare not just against the
government’s metric of welfare, but also against
alternative welfare metrics (community, sub
village head, and self-assessment survey ranks)
 Results:

Per capita consumption does not fully capture what
the community calls welfare.
The community and the elite broadly share the
assessments of welfare
The community targeting methods are more likely to
conform with individual’s self-identified welfare status.

16. Does the community lack
information to evaluate
consumption?
Community has residual information
about consumption beyond that
contained in the PMT score or even in
the PMT variables. Community has
most of the information in the PMT as
well, but choose to aggregate it in
different way.

17. A different view of individual welfare
 People believe that there are household
economies of scale, so that conditional on
per capita consumption.
 The community may know more about other
households’ ability to smooth shocks.
 No evidence that ethnic minorities are more
likely to be ranked as poor.
 Those who contribute money are likely to be
ranked as richer.
 Communities may try to provide the “right”
incentives to households.
 Village does not penalize those who spend a
lot of money on smoking and drinking

18. Conclusion





The community seems to have widely shared
objective function other than per capita
consumption;
The objective function does not differ based
on elite capture;
There are better understanding of factors
that affect a household’s earning potential or
vulnerability.
If targeting the poor based on consumption is
the only objective, the PMT performs better
than community methods.
Community does better at identifying the
poor.

19. Thank You for Listening