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Regional disparities, targeting, and poverty in India

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  • Datt, Gaurav*Ravallion, Martin

Abstract

How much can India reduce poverty nationwide by manipulating the distribution of income between regions or sectors? What is the overall effect on the poor of targeting resources toward the poorer states of India - or toward the generally poorer rural sector. Given real constraints on policy changes, it can be argued that the costs and the benefits of regional policies will tend to be borne widely within regions. Some benefits are likely to leak to the nonpoor in recipient regions, and some costs to the poor in donor regions. This paper's simulations suggest that the quantitative potential for alleviating national poverty through purely regional redistributive policies is small. Even assuming no political problems, the maximum impact on poverty is no more than could be achieved simply by giving everyone a uniform (untargeted) windfall gain equal to about 1.5 percent of India's mean consumption. And other considerations - including increased migration to areas of higher benefits - make it unlikely that the maximum impact will be attained in practice. Greater alleviation of poverty requires supplementary interventions that reach the poor within regions, by reducing the costs borne by the poor in donor regions and enhancing benefits to the poor in recipient regions.

Suggested Citation

  • Datt, Gaurav*Ravallion, Martin, 1990. "Regional disparities, targeting, and poverty in India," Policy Research Working Paper Series 375, The World Bank.
  • Handle: RePEc:wbk:wbrwps:375
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    References listed on IDEAS

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    1. Ravallion, Martin, 1989. "Land-contingent poverty alleviation schemes," World Development, Elsevier, vol. 17(8), pages 1223-1233, August.
    2. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-766, May.
    3. Ravallion, Martin & Chao, Kalvin, 1989. "Targeted policies for poverty alleviation under imperfect information: Algorithms and applications," Journal of Policy Modeling, Elsevier, vol. 11(2), pages 213-224.
    4. S. Mahendra Dev, 1988. "Regional Disparities in Agricultural Labour Productivity and Rural Poverty in India," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 23(2), pages 167-205, July.
    5. Ravallion, Martin, 1988. "Expected Poverty under Risk-Induced Welfare Variability," Economic Journal, Royal Economic Society, vol. 98(393), pages 1171-1182, December.
    6. Sen, Amartya K, 1976. "Poverty: An Ordinal Approach to Measurement," Econometrica, Econometric Society, vol. 44(2), pages 219-231, March.
    7. Ravallion, Martin, 1984. "How Much Is a Transfer Payment Worth to a Rural Worker?," Oxford Economic Papers, Oxford University Press, vol. 36(3), pages 478-489, November.
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