Publisher:
United Nations University World Institute for Development Economics Research, Helsinki, Finland
This study evaluates which type of benefit-a universal benefit, a proxy mean-tested benefit, or a categorical benefit- better cushions the poverty effects of income shocks in a developing economy. We compare the effectiveness of the three benefit...
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ZBW - Leibniz-Informationszentrum Wirtschaft, Standort Kiel
Signature:
DS 248
Inter-library loan:
No inter-library loan
This study evaluates which type of benefit-a universal benefit, a proxy mean-tested benefit, or a categorical benefit- better cushions the poverty effects of income shocks in a developing economy. We compare the effectiveness of the three benefit schemes on poverty first conceptually and then by considering two different crisis scenarios, the COVID-19 pandemic and a hypothetical agricultural shock, in a tax-benefit microsimulation model for Ethiopia. The results suggest that while the proxy-means-tested benefits are the most effective in reducing the poverty gap index, a simple categorical benefit is equally good in lowering the headcount poverty. Universal benefits may lead to lower poverty increases when crises hit. This suggests that there could be a trade-off between minimizing poverty during normal times and offering protection against shocks when the poverty incidence changes.
