Social Assistance In The Us

Public Assistance in the U.S.:
Wealth transference evidence and
Efficiency in the targeting process

Yocelyn Samantha Pérez Dávila

Microeconometrics
Professor John A. Hore
August 21st 2012

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Abstract

Having a lot of resources that allow a high social expenditure amount does not specifically imply that they are used efficiently. In other words, that a rich country like theUnited States (US) spending over a US$6.1 trillion of dollars in public assistance per year does not mean that in deed a transference from the rich to the poor occurs and neither that the vulnerable population is being covered. Some literature can be found specifying the features that should influence the decision of delivering assistance. This paper shows that even though there is evidence of wealthtransference and most of the targeting process behaves accordingly to the literature, there are populations in the US with vulnerable characteristics that are not taken into account by the US system questioning the efficiency of the social programs.

Keywords: efficiency, social assistance, vulnerable population

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Introduction

Around the world, different countries haveadopted diverse positions regarding social assistance expenditure. While some countries had followed restrictive measures, others have adopted policies to expand social expenditure. Among these last countries, the case of the United States (US) is quite interesting. The US government spends annually over US$6.1 trillion in social expenditure and has created a diverse range of social assistanceprograms. If we compare this fact in a macro perspective point of view, the amount of net social expenditure as a percentage of the GDP for the US (23.4%) is really close to the average of the OCDE countries (24%) (Graph 1). Within the same threshold, we have countries like Ireland and Australia with a 16.31% and a 16.02% respectively.

Graph 1. Net social expenditure as a % of the GDP by countrySource: Own elaboration based on data extracted from the Social Expenditure Aggregated Data OECD (2007)
However, this rate does not necessarily mean that the investment is being effective. In fact, if we compare the poverty distribution of the 3 countries above mentioned, we notice that US (11.3%) has the highest rate compared to Ireland (3.5%) and Australia (7.4%).
Along the vast literature theeffectiveness of public assistance most of the studies agree on the fact that measuring welfare effectiveness is extremely difficult. Thus, this paper intends to go a step back and to analyze the efficiency of the social expenditure. Mandl et al. (2008) consider that efficiency and effectiveness are highly related. Efficiency measures the relation between input (monetary and non-monetary resources)and output (products), while effectiveness relates how the outputs and outcomes (results) are linked to welfare objectives. When we analyze efficiency under the input/output logic, we can follow two main subjects: (i) monetary resources and (ii) targeting of the outputs. Considering a country where population is divided in two sectors, we have some “investors in welfare” – which will be simplycalled rich in this paper – and a second sector representing the “needed” – or poor in this paper, the government could act as “Robin Hood” transferring resources from the rich to the poor so the rich could finance the opportunity of welfare for the poor. But in addition, the government also need to ensure that the outputs produced with those resources are targeted to the right subject among thepoor community, so they would have to base for achieving an outcome (see
Accordingly, we could prove the efficiency of a public assistance if there is a true transference from the rich to the poor and if the vulnerable populations are being covered.

Figure 1. Elements of Efficiency
Figure 1. Elements of Efficiency

Source: Own elaboration based on Mandala et al. (2008)
This paper is...