Benefit Incidence, Public Spending Reforms, and the Timing of Program Capture

Assessments of the distributional effects of public spending reforms have generally been based on average rates of program participation by income or expenditure group. This practice can be deceptive because the socioeconomic composition of participants can change as a social program expands or contracts. The geographic variation found in 1993–94 household survey data for rural India is used to estimate the marginal odds of participating in schooling and antipoverty programs. The results suggest early capture of these programs by the nonpoor. It is shown that conventional methods for assessing benefit incidence underestimate the gains to the poor from higher public outlays and underestimate the losses from cuts.