Picking the poor: indicators for geographic targeting in Peru

This article explores geographic targeting of social programs to the poor in Peru. The potential payoffs of such targeting are large, and differences in outcomes with different targeting indicators are small. Geographic targeting is perhaps the most popular mechanism used to direct social programs to the poor in Latin America.

Schady empirically compares geographic targeting indicators available in Peru. He combines household-level information from the 1994 and 1997 Peru Living Standards Measurement Surveys and district-level information from the 1993 Peru Population and Housing Census.

He then conducts a series of simulations that estimate leakage rates; concentration curves; the impact of transfers on poverty as measured by the headcount index, poverty gap, and P2 measures of the Foster-Greer-Thorbecke family; and nonparametric (kernel) densities when transfers are based on alternative indicators.

He concludes that there is substantial potential for geographic targeting in Peru. The differences in outcomes across geographic targeting indicators are small and not statistically significant. [Author]