combinations can be subject to voting through the budget process, where households, for example, lobby for packages they are willing to pay for.

What is the consensus on the usefulness of quantitative techniques for guiding resource allocation? Some existing guidelines are less confident about the value of existing empirical tools. For example, the World Bank’s Poverty Reduction Handbook (World Bank 1993) notes that some sectors lend themselves more easily to economic cost-benefit analysis. For others, the criteria are less well defined. In theory the allocation of resources across programs should be based on the highest returns. In practice, a full economic analysis will not be possible except for a few sectors. There is then a large premium on professional judgment, based on sectoral and country expertise. The World Bank Bank’s review of PERs also confirms that, in practice, there is no optimal allocation of resources (Swaroop 1999) and that the careful design and implementation of expenditure priorities needs to be conducted country by country.

Similarly, the World Development Report on Public Finance in Development (World Bank 1988) notes that “no clear techniques exist to guide inter-sectoral choices,” although identifying bottlenecks in the economy and comparing rates of returns to alternative programs may provide guidance. The Report also finds that allocation decisions are inevitably based on intuitive judgments, with recognition of the need for overall balance between sectors.

With respect to public spending for poverty reduction, the Report identifies four (4) characteristics of spending that determine the efficiency and effectiveness of expenditure, representing a pragmatic approach to setting strategic priorities. First, the unit cost of the service per beneficiary. The report suggests that that basic low-cost services are likely to be of most help to the poor. Such schemes are both affordable by definition and self-targeting. Second, location. Subsidies are unlikely to reach the poorest groups if they are provided exclusively in urban areas. Third, a program’s ability to reach the informal sector. And fourth, an explicit focus in a program’s design on employment and poverty alleviation (e.g., labor-intensive rural works program).

The IMF (1995) also presents a pragmatic approach for guiding expenditure allocation. In reviewing the concept of “unproductive public expenditures,” the IMF identifies some pragmatic guidelines for the analysis of economic components of spending (e.g., general versus targeted subsidy, wage versus non-wage) and the functional components of spending (e.g., primary versus tertiary education). They also suggest the following additional steps for identifying unproductive spending: focus on big-ticket items to identify white elephant projects; comparison of functional and economic classification of spending between countries with the same level of development and in the same region; analysis of overall and sectoral employment to identify shortages in skill or overstaffing by level; examining institutional arrangements to identify unproductive outlays (e.g., extra-budgetary funds and quasi-fiscal activities of the central bank.

Two conclusions are suggested by the above review: one, that the guidelines do not go very far in identifying methodologies for defining pro-poor expenditure. In general, the emphasis is on well established principles of public economics – to identify interventions that address market failures and inefficiencies. To the extent that the guidelines discuss the 30