Evaluating Alternative Approaches to Poverty Alleviation: Rice Tariffs Versus Targeted Transfers in Madagascar
IMF Working Papers, January 1, 2008
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- Evaluating Alternative Approaches to Poverty Alleviation: Rice Tariffs Versus Targeted Transfers in Madagascar
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Bibliographic details
- Authors: Paul A. Dorosh, David Coady, Bart Minten
- Published: January 1, 2008
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451868715.001
Summary and objective
- Uses a partial equilibrium framework to evaluate the relative efficiency, distributional, and revenue implications of rice tariffs and targeted transfers in Madagascar, with a focus on their roles for poverty alleviation.
- Concludes that although tariff reductions generate substantial efficiency gains, those gains accrue mainly to higher income households.
- Identifies that poor net rice sellers will lose from lower tariffs.
- Argues that well designed and implemented targeted direct transfers to poor households are likely to be a substantially more costeffective approach to poverty alleviation.
- Recommends financing such targeted transfers by switching revenue raising from rice tariffs to more efficient tax instruments.
- Notes that these policy conclusions are likely to be robust to the incorporation of general equilibrium considerations.
Key findings (efficiency, distribution, revenue)
- Tariff reductions:
- Likely to produce substantial efficiency gains.
- Efficiency gains accrue mainly to higher income households.
- Lower tariffs harm poor net rice sellers.
- Targeted direct transfers:
- More costeffective for poverty alleviation compared with rice tariff policy.
- When well designed and implemented, targeted transfers better protect poor households.
- Revenue implications:
- Financing targeted transfers should involve moving revenue raising away from rice tariffs and toward more efficient tax instruments.
Policy recommendations
- Develop and implement a system of well designed and implemented targeted direct transfers to poor households.
- Finance targeted transfers by switching revenue raising from rice tariffs to more efficient tax instruments.
- Consider that the main policy conclusions are likely robust even when general equilibrium effects are incorporated.
Methodology note
- Analytical framework: partial equilibrium model applied to rice tariffs and targeted transfers in Madagascar.
- Focus on relative efficiency, distributional impacts, and revenue effects.
- Authors note robustness of conclusions to general equilibrium considerations.