The Welfare Returns to Finer Targeting: The Case of The Progresa Program in Mexico

It is common in developing countries to attempt finer targeting of the benefits from social safety net programs through combining different targeting methods. We evaluate the returns to finer targeting in the context of the PROGRESA program in Mexico. This program is a prominent program in the literature reflecting the fact that it has been widely evaluated, is perceived to be well targeted, and has been used as a prototype for many other programs in the region and beyond. We also identify the relative incremental contribution of each targeting method to the overall targeting performance of the program. We find that geographic targeting dominates demographic targeting (based on linking transfer levels to demographic composition), which in turn dominates household proxy-means targeting. However, the contribution of proxy-means targeting increases substantially as the program expands into less marginal localities. Adjusting for incomplete take-up increases the targeting performance of the program only slightly. JEL Code: D3, H50, O15 Disclaimer: The views expressed in this paper are those of the author and should not be attributed to the International Monetory Fund, its Executive Board, or its management.