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Jishnu and Shanta Talk Transfers

Shanta Devarajan's picture

Shanta:  Jishnu, your blog post and mine on cash transfers generated a lot of comments.  Some people argued that giving poor people cash will not “work” because they will spend it on consumption rather than on their children’s education, which is something we care about.  What do you have to say to that?

Jishnu:  I don’t think the question “does giving cash to poor people work?” is well-defined.  It can only be answered in the negative if we (the donors who give the cash) impose our preferences and judge what poor people spend on relative to those preferences.  But if we give poor people cash so they will be better off, then—by definition—they are better off, regardless of how they choose to spend the extra money.

To Maximize the Gains from Trade - Focus on Firms and Cities

Megha Mukim's picture

Trade and growth go hand-in-hand. When the 2008 global financial crisis hit, both collapsed.

Since then both have steadied somewhat. But recovery has been jobless in many countries. The biggest challenge that developing countries will face: sustaining economic growth, while maintaining their focus on reducing poverty and inequality. Trade can be an important weapon in the policy-maker’s arsenal to help tackle these dual objectives.

Broadly, economists agree that declining levels of poverty have been accompanied by sustained periods of rapid growth and openness in all countries. In India, there has been a wealth of econometric work that demonstrates the links through which openness to trade has contributed directly to poverty alleviation – via growth and employment. More recently, Arvind Panagariya and I measured the impact of trade on poverty across different social groups – castes and religions – in India. We found that trade openness lifts all boats, for schedules castes and tribes, and for marginalized communities. Interestingly, the impact was especially strong in urban regions.   Other research finds that states whose workers are on average more exposed to foreign competition tend to have lower rural, urban and overall poverty rates.

Let Them Eat Cash

Shanta Devarajan's picture
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The Economist this week has an excellent article on giving cash transfers, conditionally or unconditionally, to poor people to alleviate their poverty.  Calling it “possibly the single best piece of journalism on cash transfers that I’ve seen so far,” Chris Blattman—one of the scholars whose research has provided grist for this mill—laments that such writing “tends to make the Pulitzer committee fall asleep in bed.”  Maybe so, but the idea is potentially transformative.

Cash Transfers

That cash conditional on sending your children to school or taking them for a medical checkup improves health and education outcomes has been established for some time now.  More recently, some studies show that unconditional cash transfers could have the same effect.  Chris’s work demonstrates that giving cash to idle young people leads to higher business earnings than if the money were used to run vocational training courses for these people.


In parallel, Todd Moss at the Center for Global Development and my colleague Marcelo Giugale and I (along with several others) have been exploring the idea of transferring oil revenues to citizens as cash transfers, as a way of reducing the resource curse that afflicts many resource-rich countries, especially in Africa.  Gabon for instance, with a per-capital income of $10,000 has the second-lowest child immunization rate in Africa.  Marcelo and I show that, with just 10 percent of resource revenues’ being transferred directly to citizens (in equal amounts), poverty can largely be eliminated in the smaller resource-rich African countries.

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