TESTING A SOCIAL SAFETY NET

Standard benefit-incidence analysis does not distinguish policy impacts on persistent poverty from transient poverty. We offer an alternative approach, based on actual and simulated joint distributions of consumption over time, which allows us to distinguish the extent of 'protection' against poverty from 'promotion' out of poverty. The approach is illustrated by an analysis of the distributional impact of changes in cash benefits introduced to compensate for other policy reforms in Hungary. Cash benefits protected many from poverty, but promoted few out of poverty. The safety net's impact on poverty was largely due to higher average outlays, rather than improved targeting.