Targeted programs in an Economic Crisis: Empirical findings from the experience of Indonesia

Policy Research

In response to the economic, natural, and political crisis that enveloped Indonesia from August 1997 (beginning of depreciation) to May 1998 (Soeharto resignation), the new government announced support for a set of "safety net" (JPS) programs in the July 1998 budget. These included: (a) targeted sales of subsidized rice, (b) work creation programs, (c) scholarships to students and block grants to schools, (d) targeted health care subsidies, (e) community block grants. Cross sectional and panel data has been used to examine the targeting of these programs. First, "static participation incidence" (the relationship between program participation and household consumption expenditures) was substantially better than a uniform transfer, but substantially worse than perfect targeting, and remarkably similar for all of the JPS programs. Second, unlike standard static incidence measures, what we define as "dynamic participation incidence" - the relationship between changes in consumption expenditures and program participation - was very different among the JPS programs. The employment creation programs, which relied on self-selection targeting, were much more likely to reach those households experiencing large shocks to their expenditure than programs based on administrative targeting such as subsidized rice sales, scholarships, and health subsidies. Third, larger coverage does not lead to either better or worse targeting: There was no general tendency across the programs for marginal incidence to be above, or below, average incidence. Fourth, the targeting designs of many of the programs were not followed strictly during implementation of the programs. In practice, community and individual characteristics - that were de jure irrelevant - played a role in targeting. In the sales of subsidized rice program, community influence led to the program going to many more than the eligible individuals. In other programs, individual characteristics appear to have influenced targeting.

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Lant Pritchett
Sudarno Sumarto
Asep Suryahadi
Research Area 
economic crisis
social protection
safety net
Publication Type 
Working Paper
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