Benefit incidence analysis (BIA) estimates how benefits from public services, transfers, subsidies or policy changes are distributed. Average BIA measures the total benefits received by groups, while marginal BIA measures benefits from small changes. BIA involves estimating benefit values, identifying users from surveys, aggregating users into groups, and accounting for costs. It shows which groups benefit but does not consider how behaviors might change in response to policies.
Benefit incidence analysis (BIA) estimates how benefits from public services, transfers, subsidies or policy changes are distributed. Average BIA measures the total benefits received by groups, while marginal BIA measures benefits from small changes. BIA involves estimating benefit values, identifying users from surveys, aggregating users into groups, and accounting for costs. It shows which groups benefit but does not consider how behaviors might change in response to policies.
Benefit incidence analysis (BIA) estimates how benefits from public services, transfers, subsidies or policy changes are distributed. Average BIA measures the total benefits received by groups, while marginal BIA measures benefits from small changes. BIA involves estimating benefit values, identifying users from surveys, aggregating users into groups, and accounting for costs. It shows which groups benefit but does not consider how behaviors might change in response to policies.
A Users Guide to Poverty and Social Impact Analysis
Tool Name: Benefit Incidence Analysis (Average and Marginal)
What is it? Benefit incidence analysis estimates the impact of public transfers, taxes, subsidies, or policy changes that affect prices. BIA measures the distributional incidence of benefits for different groups of interest, for instance households at different income levels or in different regions. Average (or simple) BIA measures the incidence of all benefits - i.e. of the aggregate benefit. Marginal BIA estimates the incidence of the last (or the next) unit of benefit. (See also Table on Tax Incidence Analysis) What can it be used for? Benefit incidence analysis is most commonly used to examine the impact of public expenditures and public expenditure reforms. It is also applicable to other policy reforms, including reforms affecting prices that change household income or expenditure and tax reforms. It can be applied to direct transfers as well as to transfers obtained by consuming subsidized goods or services. What does it tell you? Benefit incidence tells us who benefits from services, transfers, or price changes. When estimating the size of benefits received by different groups, average BIA calculates the benefits received on average (i.e. on the basis of average unit costs); marginal BIA tells you who will benefit from a increase or decrease in benefit (i.e. the marginal change). These two might be very different typically, additional beneficiaries are more likely to belong to groups not yet covered by the system (e.g. remote areas). Complementary tools: Simple or marginal BIA can be combined with information on household or individual behavior see Tables on Behavioral Benefit Incidence Analysis, Social Impact Analysis and Beneficiary Assessment. These techniques explain distributional changes from a policy reform by taking into account the reactions households or individuals will have to the change. Key Elements: BIA proceeds as follows: (1) estimation of the value of the benefit: typically estimated as the cost of providing the service, transfer or subsidy. This can be quite difficult, with issues related to the inclusion of investment and administrative costs, and the treatment of cost recovery. Estimations are sometimes made at a regional level, to account for cost differences; (2) Identification of the users on the basis of household surveys; (3) Aggregation of users into groups of interest (commonly defined by income levels, region, urban/rural location, poor/non-poor, occupation, ethnicity, etc); (4) Accounting for household spending, in case of out-of-pocket expenditures to access the benefit. In case of financial transfers, the income groups can be defined pre- or post-transfers, which will yield different results. Requirements Data/information: (1) individual or household-level data from household surveys on welfare and on the use of service and receipt of public spending and (2) information on public expenditure to estimate the value of the benefits. For marginal BIA, panel data is ideal, although methods exist for cross-sectional data. Time: Analyzing household survey data can be time consuming, depending on how clean the data are, and how well managed the data entry process was. BIA can take between 4 to 8 weeks depending on the condition of the household survey data, and the accessibility of the unit cost of providing those services (usually obtained from government data). If a survey has to be undertaken first, then the timeframe extends significantly, to between 1 to 2 years. Skills: Good data handling skills, and experience with analyzing large scale household survey data sets. Experience with related statistical software packages (SPSS, SAS, STATA) Supporting software: SPSS, SAS, STATA. Financial cost: Costs of developing and using the tool can vary enormously, depending on whether a household survey already exists. If it does, the analysis can be done for around US$10,000. Limitations: Benefit incidence analysis does not take behavior into account, i.e. the likely change in demand from households that would result from policy changes. For methods which handle this, see Tables on Ex-post behavioral marginal incidence analysis of public spending and social programs and Social Impact Analysis. References and applications: For an overview of the technique, see Demery (2003), Chapter 2 of the Toolkit for Evaluating the Poverty and Distributional Impact of Economic Policies. Demery (2000) and van der Walle (1998) on the overall technique. Castro-Leal, Dayton and Demery (1997) on a group of African countries. Castro-Leal (1996) on South Africa. Demery et al. (1995) on Ghana. Devarajan and Hossain (1998) on benefit and tax incidence analysis in the Philippines. Van der Walle (1992) and Lanjouw et al (2001) on Indonesia. Van der Walle (2002c) on incidence of public transfers in Yemen.
The Dangers of Decentralization Author(s) : Rémy Prud'homme Source: The World Bank Research Observer, Aug., 1995, Vol. 10, No. 2 (Aug., 1995), Pp. 201-220 Published By: Oxford University Press