Assessing the Distributional Impact of Public Policy
53 Pages Posted: 20 Apr 2016
Date Written: September 2002
Economic development necessarily changes the welfare of socioeconomic groups to various degrees, depending on differences in their social arrangements. The challenge for policymakers is to select the changes that will be most socially desirable. Essama-Nssah demonstrates the usefulness of distributional analysis for social evaluation and, more specifically, for welfare evaluation, using data from the 1994 Integrated Household Survey in Guinea. Because the international community has declared poverty eradication a fundamental objective of development, the author uses a poverty-focused approach to social evaluation based on the maximin principle. This principle offers a unifying framework for analyzing the socioeconomic impact of public policy by using a wide variety of evaluation functions, inequality indicators (like the extended Gini coefficient), and poverty indices (such as Sen's index and the members of the Foster-Greer-Thorbecke family). The author also examines, within the context of commodity taxation, how to identify socially desirable policy options using both the dominance criterion and abbreviated social welfare functions. He includes computer routines for calculating various welfare indices and for plotting the relevant concentration curves.
This paper - a product of the Poverty Reduction Group, Poverty Reduction and Economic Management Network - is part of a larger effort in the network to understand the poverty and social impact of public policy.
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