18 (iii) by facilitating the payment of bills (by allowing discriminatory administrative arrangements in favor of the permanently or temporarily poor).<sup>21</sup> For a long time, analysis of these instruments focused on efficiency and was conducted at a fairly theoretical level by public finance specialists. But enormous methodological progress over the past 10–15 years has allowed the academic world to make much better assessments of the performance of these instruments not only in terms of efficiency but also in terms of their effects on the behavior of poor people and service providers. Methodological developments have occurred in three fields: microeconometrics (especially developments in the econometrics of panel data), evaluation techniques, and incentive theory applied to the theory of regulation. The standard reference on microeconometrics is Deaton (1996). A recent book edited by Bourguignon and Pereira (2003) and containing contributions from many of the key researchers in the field provides an exhaustive overview of the status of evaluation techniques. On incentive theory the standard reference is Laffont and Tirole (1993), and for developing countries Laffont’s final book (2004) will likely become the main source.

A look at the empirical evidence generated from these theories is somewhat disappointing for infrastructure policymakers. The top academic economic journals contain relatively few specific articles on targeting, affordability, or regulation for infrastructure services in developing countries (especially relative to health and education services, where there is much more data and data quality lends itself better to academic publications). On targeting—which has received the most attention, and almost invariably raises issues of affordability and regulation--, an unusually large share of the recent output has been generated by a few contributors, including P. Lanjouw, Ravallion, Van de Walle, and Wodon—alone or with coauthors.<sup>22</sup> The main contribution of this literature has been developing techniques that allow the production of poverty maps and of rigorous analysis of the evolution of poverty and its characteristics over time, making it possibly to identify the effects of various policy instruments used to alleviate poverty. Much of what is known about what works and what does not at the household level is due to these researchers.

Of particular interest to infrastructure policymakers is the effectiveness of targeted subsidies, one of the most common redistribution instruments used to reduce “infrastructure poverty.” Despite their popularity in policy circles, particularly for infrastructure, targeted subsidies (as well as safety nets) have long been held in low regard by academics for their alleged ineffectiveness (in terms of economic efficiency and incentive costs). But the verdict delivered by new databases is that in many cases these costs are modest. In other words, direct subsidies and cross-subsidies are not always as bad as they are made out to be. Moreover, these results seem to hold for both temporary and chronic poverty. (For a useful recent review of the debate and survey of the empirical evidence, see Ravallion 2003.)

> 21 See Estache and others (2004).

> 22 These publications include Lanjouw and Lanjouw (2001), Lanjouw and Ravallion (1999), Ebers and Lanjouw (2001), Ebers, Lanjouw, and Lanjouw (2003), Lanjouw, Quizon, and Sparrow (2001), Ravallion (1999a, 1999b, 2000, 2003), Ravallion and Lipton (1995), Galasso and Ravallion (2004), Van de Walle (1998a, 1998b, 2000, 2003), Van de Walle and Nead (1995), Wodon (1997), Wodon and Yitzhaki (2002), Duclos, Makdissi  and Wodon (2004),  Makdissi and Wodon (2004a, 2004b), Wodon, Ajwad and Siaens (2003) and Ajwad  and Wodon (2002, and forthcoming). There are also many good pieces of analytical work that rely on these authors’ techniques but develop them in a more operational context —which is why they seldom get published. See, for instance, the various working papers by Vivien Foster and her coauthors in the bibliography, which show that these techniques are not simply academic exercises, and can be of utmost relevance to the design of reforms on the ground.