19 This finding is not news for many infrastructure practitioners.<sup>23</sup> For water and energy there are minimum consumption levels defined by international organizations and most countries (for example, 20 liters of water per person per day and 10 kilowatt-hours per household per day).<sup>24</sup> Cross-subsidies are intended to help finance these needs through redistribution. Every “field person” has great success stories on the effectiveness of these cross-subsidies. But there are also any documented experiences where well-intended targeting mechanisms were regressive.<sup>25</sup> — there is indeed evidence that under many common circumstance, even when connection subsidies are typically more important for the poor than consumption subsidies, lifelines are the main instrument and is often set too high.

Developments in evaluation techniques also allow for more systematic assessments of the distributional implications of reforms. A reform can help poor people but be regressive, but it can also be regressive without helping the poor. These issues can now be reliably handled quantitatively. New techniques allow identification and monitoring of the most vulnerable groups with respect to reforms, as well as good evaluations of the relative and nominal impacts of reforms. But this literature provides much more than ex post assessments of policy reforms. It makes the case for systematic monitoring of the effects of new reforms and projects to ensure that they internalize lessons of the past. This can be done at the project level (see Baker 2003 and Duflo 2003 for surveys) or at the macroeconomic level. This can be important when micro household data are weak or interactions with other sectors need to be assessed.

A macroeconomic assessment of infrastructure’s importance for poor people is needed because in most cases water, energy, telecom, and transport reforms have an impact on other markets (such as the labor market and investment savings market) that matter to the poor. These feedback effects are potentially significant for poverty alleviation, and an economywide analysis is needed. This usually calls for a multiagent, multicommodity model. Computable general equilibrium (CGE) models are increasingly becoming a useful analytical response to these needs.

CGE models simulate economic and social impacts of reforms and are based on the socioeconomic structure of a social accounting matrix (SAM), with its multisectoral disaggregation. The basic idea behind a SAM is to identify the linkages in an economic system. The basic elements when constructing a SAM are input-output tables combined with government accounts and household surveys. The household surveys are crucial for performing impact analysis on welfare and poverty. How deep the analysis can go depends on data availability. The CGE literature on the effects of public infrastructure service reform is rather modest: Chisari and his colleagues (1999, 2003) and Navajas (2000) for Argentina, Andersen and Faris (2002) for natural gas in Bolivia, and Logren and others (1997) for rural Morocco. Their main contribution is to show the importance of infrastructure for achieving the MDGs and, maybe most important, to show that good regulation is redistributive and progressive.

These new results from theory and econometric analysis have generated intense international debates. In fact, analysis of poverty targeting to ensure access to affordable minimum infrastructure services for poor people and of associated regulatory needs is probably one of the two fastest growing “business lines” for international donors, think tanks, and NGOs working on

> 23 See Foster and others (2000a, 2000b, 2003, 2004) or Gomez-Lobo and Contreras (2003) for examples. 24 In addition, in developing countries the rules of thumb are that households should not spend more than 5 percent of their income on water and sanitation and more than 5–10 percent on energy (depending on the region). 25 Estache, Foster, and Wodon (2002) show how common this is in Latin America.