CID Working Paper No. 22

Targeting the Poor Using Community Information

(Originally titled: "Beat A Cheat: Hotlines to Target the Poor")

Ashok S. Rai

Revised July 2001

Abstract

Governments and aid agencies target transfers to the poor, but audits to deter the rich are costly. This paper analyzes how community information can improve targeting. If each community is given a hard budget constraint, then targeting costs can be substantially reduced by asking recipients to make reports about each other. Audits are threatened in the event of a disagreement but never carried out in equilibrium. This scheme is immune to collusion.

Keywords: targeting, community information, audits, collusion, poverty

JEL Codes: I38, 017

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