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Macro Crises and Targeting Transfers to the Poor

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  • Ravi Kanbur

Abstract

A central question for policy makers concerned with helping the poor through a macro crisis is how to target scarcer resources at a time of greater need. Technical arguments suggest that finer targeting through tightening individual programs or reallocation resources towards more tightly targeted programs uses resources more efficiently for poverty reduction. These arguments survive even when the greater informational costs and the incentive effects of finer targeting are taken into account. But political economy arguments suggest that finer targeting will end up with fewer resources allocated to that program, and that looser targeting, because it knits together the interests of the poor and the near poor, may generate greater resources and hence be more effective for poverty reduction despite being 'leakier.' Overall the policy advice to tighten targeting and to avoid more loosely targeted programs during crises needs to be given with consideration caution. However, the advice to design transfer systems with greater flexibility, in the technical and the political economy senses, is strengthened by the arguments presented here. The case for external assistance to design flexible transfer systems ex ante and to relieve the painful tradeoffs in targeting during a crisis is also shown to be strong.

Suggested Citation

  • Ravi Kanbur, 2010. "Macro Crises and Targeting Transfers to the Poor," World Bank Publications - Books, The World Bank Group, number 27786.
  • Handle: RePEc:wbk:wbpubs:27786
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    References listed on IDEAS

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    1. repec:bla:scandj:v:96:y:1994:i:2:p:275-82 is not listed on IDEAS
    2. Dercon, Stefan (ed.), 2004. "Insurance Against Poverty," OUP Catalogue, Oxford University Press, number 9780199276837.
    3. Kanbur, Ravi & Keen, Michael & Tuomala, Matti, 1994. "Labor Supply and Targeting in Poverty Alleviation Programs," The World Bank Economic Review, World Bank, vol. 8(2), pages 191-211, May.
    4. Jonah B. Gelbach & Lant H. Pritchett, 2000. "Indicator targeting in a political economy: Leakier can be better," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 4(2), pages 113-145.
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    Cited by:

    1. Kanbur, Ravi, 2017. "The Digital Revolution and Targeting Public Expenditure for Poverty Reduction," CEPR Discussion Papers 12089, C.E.P.R. Discussion Papers.
    2. repec:ilo:ilowps:478371 is not listed on IDEAS
    3. Islam, Iyanatul, & Ahmed, Ishraq. & Roy, Rathin. & Ramos, Raquel., 2012. "Macroeconomic policy advice and the Article IV consultations a development perspective," ILO Working Papers 994783713402676, International Labour Organization.
    4. Kanbur, Ravi, 2020. "Meet the New Normal, Same as the Old Normal: The State-Market Balance and Economic Policy Debates after the Pandemic," Working Papers 309989, Cornell University, Department of Applied Economics and Management.

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