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Sticks and Carrots for the Alleviation of Long Term Poverty


  • Fred Schroyen
  • Gaute Torsvik


Work requirements can make it easier to screen the poor from the non-poor.They can also affect future poverty by changing the poors' incentive to invest in their income capacity. The novelty of our study is the focus on long term poverty. We find that the argument for using work requirements as a screening device is both strengthened and weakened with long term poverty, and that the possibility of using work requirements weakens the incentives to exert effort to escape poverty. We also show that the two incentive problems, to screen poverty and deter poverty, are interwoven; the fact that the poor can exert an effort to increase their probability of being non-poor in the future makes it easier to separate the poor from the non-poor in the initial phase of the program. Finaly we show that if it is possible to commit to a long term poverty alleviation program it is almost always optimal to impose some work requirements on those that receive transfers.

Suggested Citation

  • Fred Schroyen & Gaute Torsvik, 2002. "Sticks and Carrots for the Alleviation of Long Term Poverty," CESifo Working Paper Series 659, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_659

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    References listed on IDEAS

    1. Bruce, Neil & Waldman, Michael, 1991. "Transfers in Kind: Why They Can Be Efficient and Nonpaternalistic," American Economic Review, American Economic Association, vol. 81(5), pages 1345-1351, December.
    2. Xavier Freixas & Roger Guesnerie & Jean Tirole, 1985. "Planning under Incomplete Information and the Ratchet Effect," Review of Economic Studies, Oxford University Press, vol. 52(2), pages 173-191.
    3. Gibson, John, 2001. "Measuring chronic poverty without a panel," Journal of Development Economics, Elsevier, vol. 65(2), pages 243-266, August.
    4. Joan R. Rodgers & John L. Rodgers, 1993. "Chronic Poverty in the United States," Journal of Human Resources, University of Wisconsin Press, vol. 28(1), pages 25-54.
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    Cited by:

    1. Rebecca M. Blank, 2003. "U.S. Welfare Reform: What's Relevant for Europe?," CESifo Economic Studies, CESifo, vol. 49(1), pages 49-74.

    More about this item


    long-term poverty; ratchet effect; moral hazard; screening.;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs


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