Targeting welfare: A comment

Mitchell, Hording and Gruen (1994) survey the redistributive impact of Australias targeted social security system using Luxembourg Income Study data. They argue that the Australian system has the highest target efficiency among ten countries, but the lowest benefit generosity (after taking account of tax clawbacks), implying that generosity is greater in universal or contributory systems. This comment identifies methodological problems with the accounting framework used by Mitchell, Hording and Gruen, although also arguing that the Australian targeted income support system is likely to be more efficient at reducing poverty than social insurance systems. An alternative methodological approach is outlined.