How can governments and aid agencies target the poorest? Some use detailed means tests, measuring assets and incomes. Others let the community decide for themselves. The first seems vulnerable to error and misrepresentation, the second to manipulation by elites.
One of the papers I’m most looking forward to at BREAD: a horse race between the means test and participatory methods.
When poverty is defined using per-capita expenditure and the common PPP$2 per day threshold, we find that community-based targeting performs worse in identifying the poor than proxy-means tests, particularly near the threshold. This worse performance does not appear to be due to elite capture.
Instead, communities appear to be systematically using a different concept of poverty: the results of community-based methods are more correlated with how individual community members rank each other and with villagers’ self-assessments of their own status. Consistent with this, community-based methods result in higher satisfaction with beneficiary lists and the targeting process.