Challenges Facing SSNs in Emerging and Developing Economies:

By Fernanda Brollo, David Coady, Samir Jahan, Riki Matsumoto

May 3, 2024

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Fernanda Brollo, David Coady, Samir Jahan, and Riki Matsumoto. Challenges Facing SSNs in Emerging and Developing Economies:, (USA: International Monetary Fund, 2024) accessed September 20, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We show how the standard social welfare framework can be used to assess the performance of social safety nets (SSNs) in terms of targeting efficiency and budget effort. We apply this framework to the World Bank’s ASPIRE database and find that the variation in poverty alleviation achieved by SSNs in emerging markets and developing economies (EMDEs) is driven mainly by variation in budget effort. Increasing transfer spending is therefore key to strengthening SSNs in EMDEs. However, the inability of many EMDEs to finely target transfers to poor households means the required spending increases are prohibitive over the short term, especially in low-income countries. This emphasizes the importance of enhancing targeting efficiency and we discuss how the use of proxy-means testing can contribute to this emphasizing the importance of careful design to manage the horizontal inequity inherent in such an approach to targeting.

Subject: Economic sectors, Financial crises

Keywords: Budget effort, Poverty alleviation, Proxy-means testing, Social safety nets, Transfer targeting

Publication Details

Pages:

32
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2024/096
Stock No:

WPIEA2024096
ISBN:

9798400274749
ISSN:

1018-5941

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