Do more transparent eligibility rules improve public program targeting? : Evidence from India’s old-age social pension reform

Abstract

Public program targeting is particularly challenging in developing countries. Transparency in eligibility rules for the implementation of social programs could be an effective measure to reduce mistargeting. While prior studies have examined the relevance of transparent delivery mechanisms, we focus on the clarity and verifiability of eligibility criteria. India's social pension reforms in the late 2000s provide the opportunity to examine the effect of a change in these criteria within and across states. Using two rounds of the India Human Development Survey along with extensive administrative information collected for the different states, we test whether increasing the transparency of eligibility criteria reduces the mistargeting of social pensions. We thereby allow for a tolerance band, and account for changes in social pension coverage. Our results confirm the expected relationship between the transparency of eligibility criteria and targeting performance and are robust to different specifications of the transparency measure and various robustness checks. Since eligibility criteria can be changed at low cost, this suggests a viable route for reform in many developing countries.