Exercise _1 Students

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```					Exercise #1

Known Data
Population                                      10,000 Persons
Poverty line                                     1,000 CU
Poverty (income) gap                               20%
Leakage rate                                       33%
fixed costs                                   20,000 CU
variable costs (targeting costs)                  10 CU/Person

Questions:

1) Find out the following:
Budget needed to cover gap                                CU
Nr. poor                                                  Persons

2) Estimate the reduction in the income gap achieved under the following scenarios, and discuss:
Scenario                                  #1                  #2                  #3                        #4                #5                 #6

No Leakage                            Targeted, With Leakage               With Leakage & Admin costs
Budget to eliminate
Uniform benefit      Perfectly targeted   Budget = Pov gap               poverty   Uniform benefit            Targeted
Program budget
Transfers, total
Benefit level
Income gap (CU)
Reduction in Inc Gap

3) What targeting method would you use if the age distribution of poverty will be like this:

Number of poor persons                                         Scenario
#1                     #2                   #3
Children                                       1,200                   1500                  400
Elderly                                          200                       0                 600
Total Poor                                       2,000                  2,000               2,000

Leakage rate for child allowances:

Check plausibility of data
Nr children/ couple                               4.00                    6.00                 0.80
Exercise #1

Known Data
Population                                         10,000 Persons
Poverty line                                        1,000 CU
Poverty (income) gap                                  20%
Leakage rate                                          33%
fixed costs                                      20,000 CU
variable costs (targeting costs)                     10 CU/Person

Questions:

1) Find out the following:
Budget needed to cover gap                       400,000 CU
Nr. poor                                           2,000 Persons

2) Estimate the reduction in the income gap achieved under the following scenarios, and discuss:
Scenario                                  #1                  #2                  #3                         #4                #5                 #6

No Leakage                          Targeted, With Leakage               With Leakage & Admin costs
Budget to eliminate
Uniform benefit      Perfectly targeted    Budget = Pov gap               poverty   Uniform benefit            Targeted
Program budget                                400,000                 400,000              400,000              599,970           400,000              400,000
Program caseload                               10,000                    2,000               3,000                 3,000           10,000                3,000
Transfers, total                                                                                                                  280,000              350,001
Benefit level                                         40                     200               133                  200                28                  117
Income gap (CU)                                      200                     200               200                  200               200                  200
Reduction in Inc Gap                                 20%                    100%               67%                 100%               14%                  58%

3) What targeting method would you use if the age distribution of poverty will be like this:

Number of poor persons                                           Scenario
#1                      #2                  #3
Children                                          1,200                1500                   400
Elderly                                             200                    0                  600
Total Poor                                          2,000               2,000                2,000

Leakage rate of an univ child allowance program:     40%                    25%                80%

Check plausibility of data
Nr children/ couple                                  4.00                   6.00               0.80

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