Economic development necessarily changes the welfare of socioeconomic groups to various degrees, depending on differences in their social arrangements. The challenge for policymakers is to select the changes that will be most socially desirable. Essama-Nssah demonstrates the usefulness of distributional analysis for social evaluation and, more specifically, for welfare evaluation, using data from the 1994 Integrated Household Survey in Guinea. Because the international community has declared poverty eradication a fundamental objective of development, the author uses a poverty-focused approach to social evaluation based on the maximin principle. This principle offers a unifying framework for analyzing the socioeconomic impact of public policy by using a wide variety of evaluation functions, inequality indicators (like the extended Gini coefficient), and poverty indices (such as Sen's index and the members of the Foster-Greer-Thorbecke family). The author also examines, within the context of commodity taxation, how to identify socially desirable policy options using both the dominance criterion and abbreviated social welfare functions. He includes computer routines for calculating various welfare indices and for plotting the relevant concentration curves.This paper - a product of the Poverty Reduction Group, Poverty Reduction and Economic Management Network - is part of a larger effort in the network to understand the poverty and social impact of public policy.

"The analysis of the distributional impact of policy reforms on the well-being or welfare of different stakeholder groups, particularly on th e poor and vulnerable, has an important role in the elaboration and implementation of poverty reduction strategies in developing countries. In recent years this type of work has been labeled as Poverty and Social Impact Analysis (PSIA) and is increasingly implemented to promote evidence-based policy choices and foster debate on policy reform options. While information is available on the general approach, techniques, and tools for distributional analysis, each sector displays a series of specific characteristics. These have implications for the analysis of distributional impacts, including the types of impacts and transmission channels that warrant particular attention, the tools and techniques most appropriate, the data source typically utilized, and the range of political economy factors most likely to affect the reform process. This volume provides an overview of the specific issues arising in the analysis of the distributional impacts of policy and institutional reforms in selected sectors. Each chapter offers guidance on the selection of tools and techniques most adapted to the reforms under scrutiny, and offers examples of applications of these approaches. This is a companion to the first volume, which offers guidance on trade, monetary and exchange rate policy, utility provision, agricultural markets, land policy, and education."

Reviews techniques and tools that can be used to evaluate the poverty and distributional impact of economic policy choices. This title describes the most robust techniques and tools, from the simplest to the most complex, and aims to identify best practices. It also addresses an evaluation technique and its applications.

The World Bank has partnered with the Commitment to Equity Institute at Tulane University to implement their diagnostic tool—the Commitment to Equity (CEQ) Assessment—designed to assess how taxation and public expenditures affect income inequality, poverty, and different economic groups. The approach relies on comprehensive fiscal incidence analysis, which measures the contribution of each individual intervention to poverty and inequality reduction as well as the combined impact of taxes and social spending. The CEQ Assessment provide an evidence base upon which alternative reform options can be analyzed. The use of a common methodology makes the results comparable across countries. This volume presents eight country studies that examine the distributional effects of individual programs and policy measures—and the net effect of each country’s mix of policies and programs. These case studies were produced in the context of Bank policy dialogue and have since been used to propose alternative reform options.

This paper examines the methodological issues arising in the measurement of the distributional impact of tax and expenditure policies, with emphasis on the problems related to the measurement of the impact of adjustment programs on the welfare of the poor. Both conceptual and empirical considerations suggest that public expenditures are a more potent instrument for distributional purposes than taxes but are also more difficult to analyze and evaluate. The paper concludes that more research is needed toward a better measurement of expenditure benefits.