Case study:

(Providing Pensions for the Poor: Targeting Cash Transfers for the Elderly in Mexico)

Options

The President wanted to ensure that taxpayers money used to fund the pension program went to those who really needed it. During a meeting with the Presidents social policy advisors and key officials from the social development ministry, the following three targeting options were proposed:

Option 1: All individuals 70 years and older who live in a household covered by Oportunidades would be eligible for the program.

Option 2: All individuals 70 years and older living in localities6 of 2,500 or fewer inhabitants would be eligible for the program.

Option 3: All individuals 70 years and older living in localities with high and very high levels of marginality7 would be eligible for the program.

Assume that for each of these options 100% of individuals eligible to receive a pension will be enrolled in the program as long as there are funds available in the programs budget. If the funds are insufficient to cover all eligible individuals, the program will enroll up to the number of individuals that the programs budget can fund but no further. In this latter case, assume that the poverty rate for the group of individuals that actually enroll in the program is the same as the poverty rate for all individuals eligible to enroll in the program.

Q.1:Assess the advantages and disadvantages of each of the options. In doing so, consider the targeting effectiveness as well as other criteria (including political, logistical, and financial). Summarize your findings in a table IF POSSIPLE