Updating the PMT Formula: The 2013–15 Reform of the Georgia Targeted Social Assistance Program

How to Harness the Power of Data and Inference | 397

BOX 6.6

Analytical Underpinnings and Political Economy of Updating the PMT Formula: The 2013–15 Reform of the Georgia Targeted Social Assistance Program

The Georgia Targeted Social Assistance Program (TSA) offers a useful illustration of the technical work and political economy of updating the scoring formula, the value added of regular reassessment of the scoring formula, and its implementation. The TSA was introduced in 2006, and its proxy means testing (PMT) was first updated in 2010. By 2013, several questions about the effectiveness of the program were debated by program staff, in policy circles or the media, which spiked before the national elections. A first concern was whether the formula was predicting the welfare of applicants with the same accuracy. There were concerns about weaknesses in design that could allow households to fool the system and about households concealing goods to gain eligibility for the TSA. It was believed that there were leakages to nonpoor families, and that beneficiaries were reducing their work effort when on benefits. The government decided to conduct a technical review of the program’s effectiveness, including its scoring formula (Baum, Mshvidobadze, and Posadas 2016). Figure B6.6.1 presents the timeline of the program’s key developments.

The objectives of the technical review were to validate and improve the effectiveness of the TSA: (1) to minimize inclusion and exclusion errors associated with the program, given the changing economy; (2) to remove from the PMT formula easily concealable durable goods, as there was a belief that households were indeed concealing them in an effort to be eligible for assistance; (3) to include new, easily verifiable, and potentially income-generating itemsa; and (4) to reduce the total number of variables used in the PMT formula. An impact evaluation was carried out to estimate whether the program generated work disincentives, and it proved the belief to be wrong (World Bank 2015). In addition, microsimulations using the most recent household survey data (2013) and the database of the social registry were performed to update the scoring formula (which includes two components, a consumption estimate and an estimate of the adult equivalents in a household, called a “needs index”) and recalibrate the benefit level. This analysis focused on the winners and losers from the reform (due to changes in eligibility and the benefit level), disaggregated by area of residence and region, other household characteristics, and selected vulnerable groups (persons with disability, internally displaced persons, and single pensioners) (table B6.6.1). In terms of process, the

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