Targeted Transfers in Poor Countries: Revisiting the Tradeoffs and Policy Options

36 Pages Posted: 31 Jul 2003

Date Written: May 2003

Abstract

Two tradeoffs have been widely seen to severely constrain the scope for attacking poverty using redistributive transfers in poor countries: An equity-efficiency tradeoff and an insurance-efficiency tradeoff. Ravallion provides a critical overview of recent theoretical and empirical work that has called into question the extent of these tradeoffs in poor countries. He argues that these aggregate tradeoffs are often exaggerated. Indeed, they may not even be binding constraints in practice, given market failures. There appears to be scope for using carefully designed transfer schemes as an effective tool against both transient and chronic poverty. However, the same factors that weaken the tradeoffs also suggest that efficient redistributive policies might look rather different to the programs often found in practice.

This paper - a product of the Poverty Team, Development Research Group - is part of a larger effort in the group to better understand the tradeoffs faced in development policymaking.

Suggested Citation

Ravallion, Martin, Targeted Transfers in Poor Countries: Revisiting the Tradeoffs and Policy Options (May 2003). Available at SSRN: https://ssrn.com/abstract=412803

Martin Ravallion (Contact Author)

Georgetown University ( email )

Washington, DC 20057
United States