Poverty Ravi Kanbur In spite of poverty alleviation programmes in the UK and the US, poverty still exists in both countries, and a significant share of welfare funds do not even reach the poor. This is partly because funds are simply limited and shrinking. But there are also fundamental problems in designing programmes of poverty alleviation. Maximum effectiveness would seem to suggest that transfers ought to be targeted as precisely as possible at those who most need them. Unfortunately, this is socially costly for two reasons. First, means-based transfers imply that the poor face a very high marginal tax rate, sometimes in excess of 100%, which is a major disincentive to work effort. The second difficulty is the stigma attached to means testing, and the low take-up rate this may induce. This article presents the salient features of the US and UK poverty programmes, discusses the principles behind poverty alleviation and considers various reform proposals. Among the alternatives is the idea of shifting even further away from means testing towards contingent benefits – making transfers dependent on the characteristics most often associated with poverty. The author argues that the present programmes reflect some essential considerations on which it is possible to build, and that wholesale reform would be inappropriate. Nor is it clear that public support exists for a major extension of transfers to the poor. Indeed, existing inefficiencies may be part of the price of public acceptance of the transfer programmes already in place.
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