Benefit incidence and the timing of program capture

Survey-based estimates of average program participation conditional on income are often used in assessing the distributional impacts of public spending reforms. However, marginal impacts of program expansion or contraction differ greatly from average impacts. We use the geographic variation found in sample survey data for rural India in 1993-94 to estimate the marginal odds of participating in schooling and anti-poverty programs. The results suggest early capture of these programs by the non-poor. Thus conventional methods of assessing benefit incidence underestimate the gains to the poor from higher public outlays, and underestimate their loss from cuts. 1 This paper was prepared as an input to the World Bank’s 1998 Poverty Assessment for India. The financial support of the World Bank's Research Committee (under RPO 681-39) is also gratefully acknowledged. For their comments, the authors are grateful to Zoubida Allaohua, Francisio Ferriera, Jenny Lanjouw, Valerie Kozel, Ricardo Paes de Barros, Lant Pritchett, K. Subbarao and Dominique van de Walle. “Benefit incidence analysis ” (BIA) is widely used to infer the distributional impacts of