Di Bao：A Guaranteed Minimum Income in China’s Cities？.docVIP

Di Bao：A Guaranteed Minimum Income in China’s Cities？ Di Bao: A Guaranteed Minimum Income in China s Cities? 1Shaohua Chen, Martin Ravallion Development Research Group, World Bank and Youjuan Wang National Bureau of Statistics, China Abstract: Concerns about incentives and targeting naturally arise when cash transfers are used to fight poverty. We address these concerns in the context of China s Di Bao program, which uses means-tested transfers to try to assure that no registered urban resident has an income below a stipulated poverty line. There is little sign in the data of poverty traps due to high benefit withdrawal rates. Targeting performance is excellent by various measures; indeed, Di Bao appears to be better targeted than any other program in the developing world. However, all but one measure of targeting is found to be uninformative, or even deceptive, about impacts on poverty. We find that the majority of the poor are not receiving help, even with a generous allowance for measurement errors. While on paper, Di Bao would eliminate urban poverty, it falls well short of that ideal in practice. Keywords: Urban poverty, cash transfers, behavioral responses, targeting, China JEL: I38, O15 1 For helpful discussions on this topic and comments on this paper the authors are grateful to Shubham Chaudhuri, Ren Mu, Philip O Keefe, Xiaoqing Yu and staff of the Ministry of Civil Affairs, Government of China. The findings, interpretations and conclusions of this paper are those of the authors, and should not be attributed to their employers, including the World Bank. 1. Introduction While economic reforms and structural changes in the Chinese economy have meant high rates of economic growth, it is believed that certain sub-groups have been adversely affected or have been unable to participate in the new economic opportunities due to their lack of skills, long-term illness or disability. The collapse of the old