A regional general equilibrium analysis of the welfare impact of cash transfers

an analysis of PROGRESA in Mexico

Using a regionally disaggregated computable general equilibrium model, we analyze the differential welfare impacts of a cash transfer program targeted at rural areas. The direct effect of the transfers decreases regional income differentials, but the indirect effects depend on how the program is financed. Financing the program with a more efficient tax system is also less regressive and has favorable urban impacts. The less efficient instruments result in relatively higher incomes in all rural regions, but are more regressive. The increasing share of urban poverty highlights the shortcomings of rural targeting and raises the issue of horizontal equity.

Author: 
Coady, David.
Harris, Rebecca Lee
Published date: 
2001
Publisher: 
International Food Policy Research Institute (IFPRI)
Series number: 
76
PDF file: 
application/pdf icontmdp76.pdf(151.1KB)