Transcript Poverty and Social Impact Analysis – Economic tools

Poverty and Social Impact Analysis: a
User’s Guide – Economic tools
Nairobi, 6-8th December
2006
Introduction
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The choice of the methodology or economic tool to
be applied is highly dependent :
Indirect impacts: scale of the reform, importance to
the economy and time horizon. (Nature of the
reform)
Data availability
Timeframe
Local capacity
Economic Tools to Analise Impact
Types
Examples
Direct impact analysis
Incidence
Behavioral models
Supply
Partial equilibrium tools
Multi-market
General equilibrium tools
CGEs
analysis
Poverty mapping
and demand analysis
Household models
models
Reduced-form models
SAM-IO
Macro-micro models
1-2-3
PRSP
PAMS
1. Direct Impact Analisys
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Question: who is directly affected by a policy
change and by how much.
Assumption: No behaviourial reaction from
affected households or groups - suitable for
short-term impacts and no general
equilibrium effects
Tools: incidence analysis, poverty mapping,
tools to assess public service delivery.
1.1. Incidence Analysis
Objective: To estimate the distributional incidence of
a component of income/consumption at the
household level.
Which households are exposed to a policy change:
useful for expenditure or tax reforms.
 Simple incidence analysis: the incidence of the
average expenditure.
 Marginal incidence analysis: the incidence of the last
or next unit of expenditure.
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1.2. Poverty Maps
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Objective: to display a geographical profiles
of spatial distribution of poverty within a
country, and suggest where policies might
have the greatest impact on poverty
reduction.
Application: public investment decision on
health, education, rural roads.
Shortcoming: very intensive on
disaggregated data
1.3. Tools to assess public service delivery
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Objective: to allow analysts to measure the efficiency
of public spending and the delivery performance
through assessing leakages and their sources,
captures of financial flows, and incentives and
accountability mechanisms at all stages of the
expenditure chain.
Application: analysis of the efficiency and quality of
health and education service delivery.
2. Behavioural Analysis
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Objective: to go beyond direct impact analysis to
recognize some behavioural responses among
households and economic agents.
Assumption: households doreact to an exogenous
policy shock based on behavioural specifications
and model assumptions.
Tools: behavioral incidence analysis, demand/supply
analysis, and household models.
2.1.Behavioural Incidence Analysis
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Objetive: to combine incidence analysis with
econometric estimates of household
behaviour.
Application: expanding acess to education,
disencitive effects of welfare programmes.
2.2.Demand and Suply Analyses
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Objective: to estimate the responses of
consumers and producers, respectively, to
price changes.
Application:
Demand: willingness to pay – public utility
reforms. It models the consumer’s reaction.
Supply: agriculture – trade reform (quota
elimination), subsidies, rural roads. It models
the producer’s reaction.
2.3.Household Models
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Objective: to analyze impacts by taking
account of households as both consumers
and producers.
Application: agriculture (hh is both producer
and consumer) and also huge tax reforms.
3. Partial Equilibrium Analysis
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Objective: to equate supply and demand in
one or more markets so that prices clear at
their equilibrium level.
Assumption: allow for indirect impacts that
occur when changes in one market affect
other markets, but only in the relevant
markets for the model.
Tools:multimarket models and reduced form
techniques.
3.1. Multimarket Models
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Objective: to estimate systems of supply and
demand relationships, so that the analyst can
see how policies in one sector impact on
other related sectors.
Application: agriculture policy changes
(subsidies, technical change, liberalisation)
3.2. Reduced-form Estimation
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Objective: to simulate the impact of different
policy variables on poverty and social
outcomes.
Application: direct impact on poverty (income
or consumption) of reforms controlling for a
series of counfounding factors.
4. General Equilibrium Analysis
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Objective: to go beyond partial equilibrium analysis
modelling all economic accounts in the economy
and thus aims to present a comprehensive picture of
the impact of the policy change. (different levels of
aggregation).
Assumption: results depend on the model
specification and parameters.
Tools: social account matrices (SAM), input-output
models (IO) and computable general equilibrium
models (CGE).
4.1. SAM and IO models
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Objective: to simulate impacts by selecting
some accounts as exogenous, and leaving
the others endogenous
Shortcoming: results are very sensitive to the
assumpiton of what accounts are exogenous
or not. Prices do not adjust.
4.2. CGE
Description: Completely specified models that can vary
from 1 country, 2 activities, 3 goods to several
activities and actors with hundreds of parameters.
 Application: public finance and macroeconomic
stabilization.
 Shortcoming: data demanding and time consuming.
Tools linking microeconomic distribution or behavior to
macroeconomic frameworks or models
Objective: to integrate macro models to
microsimulation of the impact of the reform. Key
parameters of the macro models feed into the
estimation technique of the impact on poverty.
 Tools:
a) linking macro-framework to a reduced form
simulation;
b) linking macro-framework to behavioral analysis
estimated for representative households;
c) linking macro-framework to microsimulation.
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References
Tools for Institutional, Political and Social
analysis (TIPS):
http://www.worldbank.org/psia
 Economic tools for impact analysis
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• “The impact of Economic Policies on Poverty and
Income Distribution: Evaluation Techniques and
Tools” (Bourguignon and Pereira da Silva, 2003)
• “Analyzing the Distributional Impact of Reforms”
(Coudouel and Paternostro)