Why may government transfers to the poor have modest effects on reducing rural inequality?
High levels of inequality are a persistent feature of many rural areas in the developing world. Rural inequality is correlated with major impediments of rural development, such as crime, elite-capture, and lack of collective action. Government transfer programs, such as conditional cash transfer, unemployment insurance, old-age pension or similar programs that target the lower tail of a village's cumulative welfare distribution function have become a very popular public policy to tackle poverty and inequality in rural areas. While the poverty impacts of those programs are well documented in the literature less attention has been given to the redistributive capacity of such policies at the village level. Among the main reasons for the neglect is a common belief that monetary transfers to the lower tail of the village welfare distribution (i.e. ‘the poor'), while excluding the upper tail (i.e. ‘the rich') from the program, must lead to a reduction in inequality. In this paper we show that the impact of such programs on reducing rural inequality may be lower than previously thought. This is because program-eligible lower and program-ineligible upper tail do not behave in isolation from each other. They are linked via interactions in credit & insurance, as well as factor & commodity markets. If, consequently, a government transfer triggers the lower tail to shift then the upper tail follows, leading to modest reductions in local inequality.
|Date of creation:||Oct 2010|
|Date of revision:|
|Note:||View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00564924|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dayton-Johnson, Jeff & Bardhan, Pranab, 1996.
"Inequality and Conservation on the Local Commons: A Theoretical Exercise,"
Center for International and Development Economics Research, Working Paper Series
qt7f9913w9, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
- Jeff Dayton-Johnson & Pranab Bardhan, 2002. "Inequality And Conservation On The Local Commons: A Theoretical Exercise," Economic Journal, Royal Economic Society, vol. 112(481), pages 577-602, July.
- Jeff Dayton-Johnson and Pranab Bardhan., 1996. "Inequality and Conservation on the Local Commons: A Theoretical Exercise," Center for International and Development Economics Research (CIDER) Working Papers C96-071, University of California at Berkeley.
When requesting a correction, please mention this item's handle: RePEc:hal:psewpa:halshs-00564924. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.