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Sticks and carrots for the alleviation of long-term poverty

Schroyen, Fred; Torsvik, Gaute
Working paper
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URI
http://hdl.handle.net/11250/162952
Date
2001-12
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  • Discussion papers (SAM) [578]
Abstract
Work requirements can make it easier to screen the poor from the nonpoor.

They can also affect future poverty by changing the poors’ incentive

to invest in their income capacity. The novelty of our study is the focus on

long-term poverty. We find that the argument for using work requirements

as a screening device is both strengthened and weakened with long-term

poverty, and that the possibility of using work requirements weakens the

incentives to exert effort to escape poverty. We also show that the two

incentive problems, to screen poverty and deter poverty, are interwoven;

the fact that the poor can exert an effort to increase their probability of

being non-poor in the future, makes it easier to separate the poor from the

non-poor in the initial phase of the program. Finaly we show that if it is

possible to commit to a long-term poverty alleviation program it is almost

always optimal to impose some work requirements on those that receive transfers.
Publisher
Norwegian School of Economics and Business Administration. Department of Economics
Series
Discussion paper
2001:34

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