Fiscal policy and trade policy can make a substantial contribution to the translation of economic growth into income poverty reduction. However, the impact of other types of government policies and interventions is much less researched and understood.
The reviewers find evidence of a moderate to strong negative association between government spending and income poverty, particularly health and education spending. They also find that cash transfers can make a large contribution to income poverty reduction, which often exceeds the contribution of in-kind transfers or indirect subsidies. There is, however, a general tendency for the poverty-reducing effect of cash transfers to be greater, the higher the level of a country’s average income.
The reviewers find no evidence to suggest that direct income taxes increase income poverty substantially, although indirect taxes often do, at least when considering their first-round impacts. They also find that trade liberalisation can have a substantial impact on income poverty. However, this this impact appears to have been more limited in low-income countries, and in sub-Saharan Africa, in comparison with other income groups and regions. For other sorts of government policies, including labour market reforms, privatisation, and land reforms, there has been much less research, which suggests priorities for further work.
Anderson E.; Jalles d’Orey M.; Duvendack M.; Esposito L. What policies and interventions have been strongly associated with the translation of growth into reductions in income poverty? EPPI-Centre, Social Science Research Unit, Institute of Education, University of London (2016), 122p