# **<mark>Box 6.1:  Design of Social Programs</mark>**

<mark>Better targeting requires different approaches for different programs. For universal programs, such as education, health, and urban services, the targeting of public spending can be improved without abandoning universality. True universalization of services from which the poor are mostly excluded is, in fact, synonymous with targeting the poor for service expansion.</mark> <mark>Several principles are useful to follow. First, public spending should focus on spending items that disproportionately benefit the poor (such as schools, health facilities, and water supply in poor areas, or education initiatives targeted at reducing repetition rates in school). Second, some government services could require cost recovery for the non-poor. For insurance programs, such as pensions and unemployment insurance, contributions and benefits should be set such that public funds are used only for transfers targeted to the poor. Income transfers and related programs should be strictly tied to a means-testing procedure. In particular, public spending for income transfer programs should be focused on the very poorest. Third, often an effective way of targeting the poor is to provide goods which are not well-liked by the nonpoor, such as a cheap but nutritious food.</mark> <mark>There needs to be rigorous monitoring of the efficiency and effectiveness of social programs. Demand and willingness to pay serve as the basic guidelines to estimate program benefits. Investments and current transfers should be compared on the basis of cost–benefit and transfer effectiveness analyses. Redistributive objectives should not be used to justify bad investments. Social investments should pass an efficiency test demonstrating that they are more costeffective than income transfer programs in bringing monetary or non-monetary benefits to the poor.</mark> <mark>The design of social programs should correspond to the demand of the beneficiary population and include genuine beneficiary participation. In general, this implies that service provision should be at the level of willingness to pay. Cash and voucher programs are preferable to inkind service provision, unless the latter is justified by better targeting or externalities. In some cases, a switch from in-kind to voucher financing can be an effective means to increase transparency, consumer choice, competition, and internal efficiency. Beneficiary participation in program design, implementation, monitoring, and evolution is essential.</mark> <mark>An increasing share of social policy is implemented at the state and municipal level, especially in education, health, and social assistance. Thus, any social spending reform must include reforms at the state and municipal level. Social spending reform at the state and municipal level revolves around three objectives. First, reforms should improve incentives for providing service to the poor. This could include conditional cash transfers. Second, the responsibilities of the different levels of government should be clarified where they are unclear. Finally, reforms must attempt to strengthen the capacity of states and municipalities to deal with poverty-related issues.</mark> _<mark>Source</mark>_ <mark>: World Bank (2001).</mark> 40