What factors need to be considered when designing and implementing an evaluation methodology? How can both micro and macro levels be effectively incorporated into the poverty impact evaluation of a particular policy? This book by the World Bank is a collection of techniques used to evaluate the impact of economic policies on poverty and income distribution. It aims to organise these approaches around core elements of ‘incidence analysis’, showing its many uses.
There has been a recent emphasis on the need to evaluate development policies against their impact on poverty reduction. Incidence analysis provides a mechanism to rank gainers and losers of a policy against individual welfare levels or poverty status. In accordance with this view, poverty incidence analysis must begin at the micro level and this forms the basis of the evaluation methods reviewed. There are a number of weaknesses in the set of the poverty evaluation techniques presented and many tools are imperfect or inappropriate for particular applications.
The tools reviewed are organised into two parts, part one examines how to evaluate economic policies using micro-economic techniques. These kinds of policies affect poverty through individual taxation and spending and are subject to a number of conceptual issues:
- Accounting vs. behavioural approaches: The accounting approach only acknowledges income and expenditure through the state. This ignores individual responses to different policies.
- Ex-post vs. ex-ante: Ex ante evaluation involves quantitative techniques that try to predict the effects of policies. Ex-post evaluates policies to check whether the actual effects were those expected.
- Average vs. marginal: Evaluating the impact of policies on the average population doesn’t allow for the impacts felt by margin groups.
- Qualitative vs. quantitative: The impact on poverty cannot be purely defined against a measurable income as there are many dimensions to social programmes.
- Partial vs. universal coverage: Policies with geographical dimensions may be difficult to evaluate due to their limited coverage. Certain approaches enable a universal analysis of such cases.
Part two considers techniques to evaluate economic policies that affect poverty through changes in the growth, structure and the parameters of the macro economy. A number of models can facilitate this evaluation and highlight key issues:
- The relationship between growth and poverty in aggregate models: changes in poverty can be seen as either the uniform growth of income or changes in its distribution.
- Linking household survey data to macro-consistency accounting frameworks: there is a need to investigate the distribution of growth within different sectors or groups in society.
- Poverty analysis with multi market models: changes in relative prices can affect a household’s real income.
