Proxy means test for targeting welfare benefits in Sri Lanka

Abstract

Section I of this paper will briefly discuss the rationale and methodology for proxy means tests, placing them in the context of some of the relevant economic literature on the topic. Section II will describe the data and methodology for developing the targeting formula for the Sri Lankan case. Section III will present results and identify the models considerable best suited for the purpose. Section IV will analyze the targeting outcomes derived from simulations with the models and relate these to possible choices for eligibility thresholds. Section V will compare the selected models with some alternative methods for estimating the model. Section VI will derive and compare welfare gains for a few examples of payment schedules used to distribute benefits to the eligible groups identified by the formulas, and Section VII will conclude by summarizing some of the important conclusions from the exercise.

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