Parallel Session IARIW 2014

1. Discussant:
Patricia Ruggles
Senior Fellow
IARIW Meetings
Session 2b
August 25, 2014
Discussion: Accounting for Different Needs
when Identifying the Poor and Targeting
Social Assistance
by
Ludovico Carraro
Martin Castro Cumpa

2. • Paper compares estimates of poverty and welfare across
families of different sizes and types in Moldavia and
Mongolia
• The paper argues that the current World Bank approach
for comparing welfare across countries—per capita
income comparisons—is misleading for smaller
households and for those with special needs, such as the
disabled
• Alternative methods of adjusting for differences in needs
using subjective data and la
Footer Information Here 2
Purpose of Paper

3. • Moldova: Household Budget Survey
• Used to identify the appropriate level for the income eligibility
threshold for social assistance
• Expenditure aggregates adjusted by OECD equivalence scales (1
for first adult, 0.7 for additional adults, 0.5 for children)
• Supplementary administrative data also used
• Mongolia: Household Socio-Economy Survey
• Used to design a proxy means test based on household
characteristics, living conditions and assets, to establish the
eligibility of the household for receipt of Food Stamps
• Consumption aggregate includes food (purchased and from own
production), education, health, transport, communication, utilities,
heating, rent and durable goods.
• Adjusted using per capita income
Footer Information Here 3
Data: Household Consumption Surveys

4. • Welfare is measured using a household consumption
expenditure aggregate which need to be adjusted by
household size and composition to make welfare
comparison between households.
• Official adjustments: OECD scales
• Also: Minimum Income Question allows subjective estimate of
needs by family size and characteristics
• Both methods yield similar adjustments by family size:
Footer Information Here 4
Measures of Welfare: Moldavia

5. Subjective and OECD Equivalence Scales for
Moldavia
Estimated
Scale
OECD
Scale
One Adult 1 1
Two Adults 1.63 1.7
Adult and one child 1.66 1.5
Adult and two (+) children
2.12 2.00
Couple and one child
2.11 2.20
Couple and two children
2.53 2.70
Couple and three (+) children
2.86 3.20
Footer Information Here 5
Comparison of Equivalence Scales for Moldavia

6. • Simple subjective method didn’t work for disabled—
problem compounded by preponderance of low income
households in disabled group, which affects needs
perceptions
• Instead—used two methods:
• Subjective assessment of living standard (very bad, bad, etc.)
• Based on comparisons for one person households; assumed same
ratio for larger households
• Asset score
• In 2006, both found disabled needed about 45% more
• In later years, asset score method found lower
differences, subjective method slightly higher
Footer Information Here 6
Estimation of Needs for Households with Disabled
Members, Moldavia

7. • Calculated by comparing share of total expenditure
going to specific categories of goods by household size
and characteristics
• Norms are calculated for each category of “private
expenditure”—eg, non-fixed--and these are used to
develop equivalence scales
• Scales derived are compared to actual expenditure
shares by income category
• Result:
Footer Information Here
Equivalence Scales for Mongolia
7

8. All 1.00 0.84 0.56
Bottom 40% 1.00 0.85 0.59
Bottom 30% 1.00 0.85 0.59
Bottom 20% 1.00 0.85 0.59
Bottom 10% 1.00 0.84 0.59
Bottom 5% 1.00 0.84 0.59
Footer Information Here
Equivalence scales based on consumption patterns,
Mongolia 2012
8
First Other Children
adult adults under 15

9. • Can only be computed using asset scores; expenditure
by category not available
• Overall, increase in needs for households with a
disabled member is estimated to be about 1.14 times the
amount for those without a disabled member
• One person-households with disabled excluded due to
small sample size; one disabled per household assumed
• Using OECD equivalence scales, and assuming the first
adult has a weight of 1, the equivalence scales for
households with a disabled member would be 1.29 for
two adults, and 1.4 for three or more
Footer Information Here
Disability Adjustments in Mongolia
9

10. • For Moldavia:
• Large variations in the matching between per capita rankings and
subjective assessment of social workers
– Mismatch especially large for smaller households, which are
deemed poorer by social workers than through per capita rankings
• Equivalence scales perform better compared to social worker
assessments
• For Mongolia:
• Among te poorest households according to the social workers,
65% of them belong to the same ranking based on the per adult
equivalent approach compared to only 50% when using per
capita consumption.
Footer Information Here 10
Comparison with Assessments by Welfare Workers

11. • The authors conclude that per capita equivalence scales
fail to perform well in measuring needs in both countries,
as judged by comparison to other methods of estimating
relative needs
• For Moldavia, which already uses OECD equivalence
scales, these are found to be relatively close to scales
estimated using a minimum income question and to social
worker assessments
• For Mongolia, which uses per capita adjustments for
policy purposes, comparison with social worker
assessments implies substantial biases—underestimation
of needs of small households and overestimation for
larger ones
Footer Information Here 11
Authors’ Conclusions

12. • Very interesting start on this important question
• Many remaining estimation and specification issues; as a
first start, this paper includes many assumptions that
need further testing
• Data issues are also a constraint, especially in estimating
disability impact
• But—I agree that these data, along with many similar
estimates in the literature, strongly imply that per capita
adjustments are not satisfactory in needs comparisons
• Need for further investigation of specific need scales for
countries of different types
Footer Information Here 12
My Conclusions

13. Thank You!