Resource information
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. The author 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.
