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Optimal Poverty Reduction, Adjustment, and Growth

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  • Bourguignon, Francois

Abstract

This article analyzes poverty reduction policies in an applied optimal growth framework. Assuming that poverty reduction is effected through redistribution, it focuses on the static and dynamic tradeoffs between equity and efficiency and on the choice between current income and future income (that is, current productive asset) transfers to the poor. By numerically estimating a stylized economy, it is shown that, given reasonable assumptions about behavioral parameters, the efficiency cost of poverty reduction in an economy on a steady growth path is relatively low. In a period of adjustment following a severe exogenous shock, however, the scope for redistribution may be extremely limitied if there is a constraint on foreign borrowing. Plausible examples are given of adjustment cases in which poverty reduction becomes optimal only after partial adjustment has been achieved. Copyright 1991 by Oxford University Press.

Suggested Citation

  • Bourguignon, Francois, 1991. "Optimal Poverty Reduction, Adjustment, and Growth," World Bank Economic Review, World Bank Group, vol. 5(2), pages 315-338, May.
  • Handle: RePEc:oup:wbecrv:v:5:y:1991:i:2:p:315-38
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    Cited by:

    1. Miguel Székely, 1997. "Policy Options for Poverty Alleviation," Research Department Publications 4062, Inter-American Development Bank, Research Department.
    2. Miguel Székely, 1997. "Policy Options for Poverty Alleviation," IDB Publications (Working Papers) 1277, Inter-American Development Bank.
    3. Bourguignon, Francois & de Melo, Jaime & Morrisson, Christian, 1991. "Poverty and income distribution during adjustment: Issues and evidence from the OECD project," World Development, Elsevier, vol. 19(11), pages 1485-1508, November.
    4. Krumm, Kathie & Milanovic, Branko & Walton, Michael, 1994. "Transfers and the transition from socialism : key tradeoffs," Policy Research Working Paper Series 1380, The World Bank.
    5. Anne Maasland, 1992. "Consecuencias Distributivas de las Políticas de Ajuste: Una Revisión de Metodologías," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 29(86), pages 141-162.
    6. Maasland, Anne, 1990. "Methods for measuring the effect of adjustment policies on income distribution," Policy Research Working Paper Series 474, The World Bank.
    7. Miguel Székely, 1997. "Opciones de políticas para la paliación de la pobreza," Research Department Publications 4063, Inter-American Development Bank, Research Department.

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