Safety nets and safety ropes: who benefited from two Indonesian crisis programs: the "Poor" or the "Shocked?"

The "safety net" discussed in this paper guarantees against a poverty fall past an absolute level; the "safety rope" guarantees against a fall of more than a given distance. The safety net is concerned with an increase in poverty; the safety rope mitigates risk through social insurance or social protection.

Calculations of the benefit incidence and targeting effectiveness of safety net programs typically examine only the relationship between a household's current expenditures and program participation. But in programs that respond to an economic shock or intend to mitigate household risk, it is not only the current level of expenditures that matters but also changes in expenditures.

Safety net programs may intend to benefit only the currently poor; programs to mitigate shocks may intend to provide transfers to those whose incomes have fallen, even if they have not fallen below an absolute poverty threshold.

Sumarto, Suryahadi, and Pritchett examine the targeting performance of two programs created to respond to the social impacts of Indonesia's crisis.

They find strong evidence that one program, subsidized sales of rice targeted to the permanently poor, was only weakly related to the shock in consumption spending. A job creation program was much more responsive to changes in spending. [Author]