TESTING A SOCIAL SAFETY NET

Standard benefit-incidence analysis does not distinguish policy impact s on persistent poverty from transient poverty. We offer an alternativ e approach, based on actual and simulated joint distributions of consu mption over time, which allows us to distinguish the extent of 'protec tion' 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 Hu ngary. Cash benefits protected many from poverty, but promoted few out of poverty. The safety net's impact on poverty was largely due to hig her average outlays, rather than improved targeting.