Working Paper: October 2002

Targeted Programs in an Economic Crisis:
Empirical Findings from the Experience of Indonesia

Lant Pritchett (Kenedy School of Government, Harvard University)
Sudarno Sumarto, Asep Suryahadi (SMERU Research Institute)

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Abstract: 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.

TABLE OF CONTENT

Abstract

I. Introduction

II. The Design and Targeting of the Indonesian Crisis JPS Programs

A. Crisis, Impact, and the Launch of the JPS
B. Targeting of the JPS Programs: Data Availability
C. The JPS Programs and Their De Jure Targeting Design
D. Data Sources Used to Examine Targeting: Program Participation and Consumption

III. JPS Program Participation Incidence: (Mildly) Progressive, Remarkably Uniform

A. Empirical Findings
B. Interpretations

IV. Dynamic versus Static Participation Incidence: Safety Nets versus Safety Ropes

A. Empirical Findings
B. Interpretations

V. Marginal and Average Incidence in the JPS Programs

A. Empirical Findings
B. Interpretations

VI. De Jure versus De Facto Targeting: Community Influence on Targeting

A. Empirical Findings
B. Interpretations

VII. Conclusion

References

Appendix