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Cornia and Stewart argue

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 130

eneficiaries and of delivering programme benefits to them) ranges from 0.4 to 29 percent of the total programme costs in the case of individual assessment mechanism. For self targeting, it ranges from 3 to 10 percent of total programme costs. Estimates of the administrative costs for different mechanisms are summarised in Table 6.2. Table 6.2: Cost of Alternative Targeting Mechanisms (As percent of total cost of programme) Details TAC Median Individual Assessment 0.4 to 29 9 Geographic Targeting 4.0 to 16 7 Self Targeting 3.0 to 10 6 Source: Grosh (1995). Administrative costs vary greatly by programme type. Screening costs have a small share in TAC. In the light of these results, Grosh (1995) draws three main conclusions: i. Targeted programmes have much larger progressive incidence than general food price subsidies. They even have somewhat more progressive incidence than scarce public health and educational services. ii. The administrative costs of programmes with moderate good incidence need not be excessively high. iii. It is not possible to rank targeting mechanism a priori. There are no broad correlations between the targeting mechanism and targeting outcomes, and there appears to be a weak correlation with administrative costs. 6.2 Role of BPL Surveys in Targeting The BPL Census (2002) in India for rural areas used thirteen indicators. It was argued by analysts (e.g. Sundaram, 2003) that these thirteen indicators have no clear link with deprivations in either the capability space or in regard to consumption of goods and services serving as proxies for such deprivations. Secondly, the procedure of simple aggregation of scores effectively implies cardinal equivalence across what are essentially ordinal rankings of alternative states of households in respect of individual indicators. Sundaram (2003) observes ‘…. in fact, in seeking to combine in a single measure from several facets of deprivation, the notion of a hierarchy of basic needs is abandoned. There could be absurd situation of a score of zero for non-ownership of any consumer 131

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