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Targeted Transfers in Poor Countries – Revisiting Trade-offs and

By Martin Ravallion and Ferreira Emanuela Galasso Robert Holzmann


The conventional wisdom in mainstream development policy circles is that income transfers to the poor, and safety net policies more generally, are at best a short-term palliative and at worst a waste of money. They are not seen as a core element of an effective long-term poverty reduction strategy. One commonly heard view is that the poor are roughly equally poor in the poorest countries, and there are so many of them and resources are so limited, that these policies are a non-starter. While the extent of poverty and the resource limitations are both clear enough, the other premise is not; it is now well-established from household survey data that even in the poorest countries, the differences in levels of living amongst the poor can be sizable. 2 Another long-standing critique of this class of policies has potentially more weight. This says that leakage of benefits to non-target groups and adverse incentive effects on the labor supply and savings of transfer recipients create a serious trade off against efficiency and growth, which is seen to be crucial to rapid poverty reduction. Even broadly supportive assessments o

Publisher: World
Year: 2003
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