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conditional cash transfers

Fighting Poverty at Each Stage of Development

Martin Ravallion's picture

One size does not fit all in development policy, as World Bank President, Robert B. Zoellick, emphasized in a recent speech, “Democratizing Development Economics.” The right policies depend on the stage of economic development (amongst other things). What does that mean for the Bank’s overarching objective, a world free of poverty?

Three construction workers return from a day of work as part of the Rural Roads project to improve access to markets in Rajasthan, India. Photo: Michael Foley

The Bank’s policy dialogues in poor countries have long emphasized policies to promote economic growth as the main means of fighting income poverty. These include efforts to ensure “pro-poor growth,” such as by avoiding policy biases against labor-intensive production.  However, direct redistributive policies in favor of the poor typically get far less attention.

It is not obvious why. Even some very poor countries have high inequality—in fact, some of the highest levels of income inequality in the world are found in poor countries (see the 2006 World Development Report: Equity and Development). And developing countries have redistributive policy options through tax and spending instruments (including cash transfers). There are concerns about trade-offs between equity and efficiency, though it can also be argued that high inequality is an impediment to economic growth. So should direct redistributive interventions play a bigger role?