In this paper the authors propose a general approach that jointly integrates horizontal and vertical equity criteria in the assessment of poverty alleviation programs, with the strength of each criterion captured through its own inequity-aversion parameter. This contrasts with the assessment of poverty alleviation programs done with simple under-coverage and leakage ratios or with other methods that do not take into account the heterogeneity of the poor and that do not address directly the social benefits of achieving normative criteria. They illustrate their methodology by using Tunisian data and two alternative poverty alleviation policies.
There is a clear need among policymakers for meaningful descriptive and normative measures of policy effectiveness for the analysis of poverty alleviation programs. This paper suggests an approach, which brings distribution-sensitivity formally into the assessment of such poverty effectiveness. The methodology is intended to complement the common use of two crude indices, the under-coverage and the leakage ratios. An important feature of it is its formal integration of horizontal and vertical equity criteria. The policy effectiveness measures are decomposable into leakage, vertical and horizontal components. They provide money-metric measures of the social impact of anti-poverty programs that can be useful both for descriptive and normative purposes.
The use of these measures is illustrated using Tunisian households' data and two alternative targeting schemes:
the first scheme, which is currently in force, awards benefits to the poor through foodstuff subsidization
the second scheme targets transfers based on the easily observable socio-demographic indicators
The results show that, although commodity targeting involves higher leakages and lower vertical equity, the fact that it is less horizontally inequitable than socio-demographic targeting may render it preferable for policy purposes. Hence, taking horizontal equity seriously can have important implications for the design and the understanding of poverty alleviation policies.