The pursuit of simplicity : Can simplifying eligibility criteria improve social pension targeting?

Abstract

Governments in developing countries struggle to reach intended beneficiaries when targeting social transfers towards vulnerable populations. Rates of eligible individuals not receiving social transfers and ineligible individuals receiving them tend to be high, constraining the effectiveness of such anti-poverty programs. While interventions to incentivize or monitor local agents in charge of selecting beneficiaries are typically expensive, an important complementary and cost-effective approach could be to reform eligibility criteria to facilitate the selection of beneficiaries. Whether reforms should focus on reducing the number of rules, or selecting criteria which are easy to verify, or do both remains an unanswered question. We address this knowledge gap based on India’s social pension scheme for elderly poor. We find that making eligibility criteria easier to verify has the potential to achieve a substantial improvement in the targeting performance through a reduction in the exclusion error. Those who meet the relevant criteria have a much higher chance of actually becoming beneficiaries. Since eligibility criteria can be changed at low cost, this suggests a viable route for reform in many developing countries. However, a major caveat remains that criteria must sufficiently well reflect actual poverty if the more accurate selection of beneficiaries according to formal criteria shall also translate into actual poverty reduction.