Chapter Poverty Reduction Policies

Given a description and analysis of poverty, what policies may be invoked to reduce poverty? There is a very strong link between economic growth and poverty reduction; Dollar and Kraay (2002) found, based on a study of 418 “episodes ” worldwide that a 1 percent increase in per capita income is associated with a 1 percent increase in the incomes of the poor. The relationship is robust and has not changed over time. Although a num-ber of policy variables, as measured by economic openness, the rule of law, and fiscal discipline, appear to boost economic growth, they do not have a discernible inde-pendent effect on the incomes of the poor. The World Bank classifies its antipoverty activities into three groups: • Fostering opportunity—through well-functioning and internationally open mar-kets, and investments in infrastructure and education. • Facilitating empowerment, which amounts to including people in the decision-making process. This requires government accountability, strong media, local organizational capacity, and mechanisms for participation in making decisions. • Addressing income security, which tackles the problem of vulnerability. This calls for insurance programs, disaster relief procedures, and a solid public health infrastructure. The chapter concludes with a brief sketch of poverty reduction policies in Tanzania