Poverty and policy

In this analysis of public policy to reduce poverty, the authors point out, among other things, that typically the highest incidence and severity of poverty are still found in rural areas, especially if ill-watered. For many of the rural poor, the only immediate route out of poverty is by migration to towns, to face a higher expected income, although often a more uncertain one. This may or may not reduce aggregate poverty. We can be more confident that growth in agricultural output -- fueled by investment in human and physical infrastructure -- is pro-poor, though not because the poor own much land. The policies pursued by most developing countries up to the mid-1980s -- and by many still -- have been biased against the rural sector in various ways. The same is true -- although different policies are involved -- of the other major sectoral concentration of poor, namely, the urban informal sector. There are clear prospects for reducing poverty by removing these biases. Looking ahead (far ahead, in some cases), it is less clear how much further gain to the poor can be expected from introducing a bias in the opposite direction. Neutrality should be the aim. We need good data and measurement to identify which public actions are effective in fighting poverty. There have been a number of advances in household data and analytic capabilities for poverty analysis over the last ten years. We are in a better position than ever to devise well-informed policies. The authors identify two important roles for public action. One is to foster the conditions for pro-poor growth, particularly by providing wide access to the necessary physical and human assets, including public infrastructure. The other is to help those who cannot participate fully in the benefits of such growth, or who do so with continued exposure to unacceptable risks. Here there is an important role for aiming interventions by various means to improve the distribution of the benefits of public spending on social services and safety nets in developing countries. Those means range from the selection of key categories of public spending (such as primary education and basic health care) to more finely targeted transfers (including nutrition and health interventions) based on poverty indicators, or some self-targeting mechanism. Though disappointing outcomes abound, many countries have demonstrated what is possible with timely and well-conceived interventions.