Poverty alleviation strategies under informality: evidence for Latin America

• Autores: Caruso Bloeck, Martin; Galiani, Sebastián; Weinschelbaum, Federico
• Año de publicación: 2019
• Idioma: inglés
• Tipo de recurso: artículo
• Materia: INEQUALITY; LATIN AMERICA AND THE CARIBBEAN; MEANS TESTING; POVERTY; PROXY MEANS TESTING
• Institución: Consejo Nacional de Investigaciones Científicas y Técnicas

Strategies based on growth and inequality reduction require a long-run horizon, and this paper therefore argues that those strategies need to be complemented by poverty alleviation programs. With regards to such programs, informality in Latin America and the Caribbean is a primary obstacle to carry out means testing income-support programs, and countries in the region have therefore mostly relied on proxy means testing mechanisms. This paper studies the relative effectiveness of these and other mechanisms by way of a formal model in which workers choose between job opportunities in the formal and informal sectors. Although the means testing mechanism allows for a more pro-poor design of transfers, it distorts labor decisions made by workers. On the other hand, (exogenous) proxy means testing does not cause distortions, but its pro-poor quality is constrained by the power of observable characteristics to infer income levels. However, since taxation is necessary to fund programs, redistribution becomes less effective, especially for programs other than means testing. The paper concludes by discussing the implications of these results for the design of more efficient targeting programs.
Fil: Caruso Bloeck, Martin. University of California at Berkeley; Estados Unidos
Fil: Galiani, Sebastián. University of Maryland; Estados Unidos
Fil: Weinschelbaum, Federico. Universidad Torcuato Di Tella. Departamento de Economía; Argentina. Consejo Nacional de Investigaciones Científicas y Técnicas; Argentina