Refining Targeting against Poverty Evidence from Tunisia.

This paper introduces a new methodology to target direct transfers against poverty. Our method is based on estimation methods that focus on the poor. Using data from Tunisia, we estimate ‘focused’ transfer schemes that highly improve anti-poverty targeting performances. Post-transfer poverty can be substantially reduced with the new estimation method. In terms of P2, the most popular axiomatically valid poverty indicator, moving from 1.30, the level reached under subsidies, to 0.36, the level reached with the best OLS method, costs about 2.9 percent of GDP. An additional reduction down to 0.25, that is another 30 percent reduction in poverty, requires only a few hours of statistician work. Finally, the obtained levels of under-coverage of the poor is so low that ‘proxy-means’ focused transfer schemes becomes a realistic alternative to price subsidies, likely to avoid social unrest.