Ex-Ante Simulations of Direct and Indirect Effects of Welfare Reforms

28 Pages Posted: 15 Nov 2007

See all articles by José Cuesta

José Cuesta

Inter-American Development Bank (IDB)

Juan Ponce

Facultad Latinoamericana de Ciencias Sociales (FLACSO) - Ecuador

Abstract

This paper estimates an ex-ante structural model that incorporates behavioral labor responses to analyze the distributive impacts of a long proposed reform in Ecuador: the shift from regressive consumer gas subsidies to the progressive Human Development Bonus (HDB). Even the most radical reform options may not have the expected sizeable distributive gains. This is the case even after the targeting instrument, SelBen, substantially corrects the current targeting deficiencies of the HDB. Poverty reduction is maximized (reduing poverty by about five percentage points) when the targeting instrument redirects resources to households close to the pre-reform poverty line. Most of this estimated impact accrues from direct effects with a minimal contribution from indirect effects. Labor-driven indirect effects are multiple and complex, tending to cancel out one another.

Suggested Citation

Cuesta, José and Ponce, Juan, Ex-Ante Simulations of Direct and Indirect Effects of Welfare Reforms. Review of Income and Wealth, Vol. 53, No. 4, pp. 645-672, December 2007. Available at SSRN: https://ssrn.com/abstract=1030126 or http://dx.doi.org/10.1111/j.1475-4991.2007.00249.x

José Cuesta (Contact Author)

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

Juan Ponce

Facultad Latinoamericana de Ciencias Sociales (FLACSO) - Ecuador ( email )

La Pradera 7-174 y Diego de Almagro
Quito, Pichincha 000
Ecuador

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
12
Abstract Views
712
PlumX Metrics