POVERTY REDUCTION STRATEGY TN

Cornia and Stewart argue that the two types of error should be viewed
asymmetrically. In particular, the F-mistake should be viewed as far more serious than
the E-mistake. Often, minimising the E-mistake can increase the F-error. On the other
hand, there could be programmes, where, in order to minimise the F-error, a very large
E-error might be committed. Such errors would inevitably lead to very high cost of
programmes of poverty alleviation. The F and E errors are usually measured as a
proportion of total population or as proportion of total poor population. Thus:
F-error = P nc /N or P nc /P
E-error = NP c /N or NP c /NP
Some of the important conclusions derived by Cornia and Stewart from the
studies that they reviewed may be listed as follows.
i. Universal schemes tend to involve significant E-mistakes.
ii.
Universal unrestricted subsidies can sometimes provide much larger absolute
benefits to richer than the poorer groups, since the richer groups can afford to
consume more.
iii. In a number of countries, targeted schemes have replaced universal schemes. In
almost every case, the result has been a major increase in F-mistakes.
iv. Administrative costs are estimated to be higher for the targeted food
interventions; they range from 2 to 5 percent of the total costs of these
schemes.
v. The political support for general schemes that reach some of the non-poor
appears to be higher than for the more narrowly targeted schemes.
c. Costs of Targeting: Some Empirical Results
The main cost of targeting is the administrative costs that need to be incurred both in the
process of screening or identifying the poor, that is, the potential beneficiary, and the
cost of delivering the benefit to them. Subsequently, there may be monitoring and followup
costs, as for example, in recovering a subsidized loan. In estimating targeting costs,
Grosh (1995) distinguishes between total administrative costs and targeting costs. Total
administrative costs (TAC) are defined as covering all costs necessary to deliver the
targeted benefit. Only a part of these are called “targeting” costs (TC) that are incurred
during the screening process that determines as to who benefits. Estimates by Grosh
indicate that total administrative costs (including the costs of screening potential
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