Governments around the world rely on social assistance to reduce poverty, but the poorest are left behind.
There has been a sharp reduction in global poverty over the past 25 years, from 36% in 1990 to 10% in 2015. Yet, 736 million people continue to live on less than USD 1.90 a day (World Bank, 2015), most of them in middle-income countries. In recent years, the largest reductions in extreme poverty worldwide have resulted from substantial economic growth in many emerging economies, particularly China and India (Page and Pande, 2018).
While future growth should continue to reduce poverty, it will not solve the problem by itself – both because sustained economic growth over decades of the type seen in China is the exception and not the norm, and because economic growth has excluded a large share of the population as illustrated by the still high poverty levels in rapidly growing countries (Jones and Olken, 2008). Is the latter because of a lack of redistribution mechanisms such as social assistance programmes or in spite of them?
Annually, developing countries spend 1.5% of their GDP on social assistance programmes (World Bank, 2018). Yet, there is limited evidence on how effective these programmes are in reducing poverty and inequality. Further, in times of crisis such as during the COVID-19 pandemic, there have been large increases, and calls for further increases, of social assistance transfers to cushion the economic impact on the poor. Without clear evidence, it is difficult for policymakers to assess how effective these increases will be in assisting target populations.
To help fill these knowledge gaps, this brief presents three key findings on the effectiveness of social assistance. These messages are based on our analysis of a rich World Bank dataset – ASPIRE (The Atlas of Social Protection Indicators of Resilience and Equity) – that covers 123 developing and transitioning countries. Our findings are restricted to this set of 123 countries. This work adds to and corroborates previous analysis (Margitic and Ravallion, 2019) that found that prevailing poverty measures have proved inadequate in reaching the poorest.
- Social assistance is the main tool to reduce poverty.
Of all the different forms of social protection and labour programmes, social assistance is the tool that reaches the largest number of people and lifts them out of poverty. Across the 123 countries we analyse, social assistance programmes reach 2.7 billion people and lift 7% of them out of poverty.
- Yet, the poorest are left behind.
Social assistance fails to reach the poorest in low-income countries across sub-Saharan Africa and South Asia.
- Failure to reach the poorest is correlated with informality and data quality.
Mistargeting of social assistance transfers is positively correlated with informality and statistical capacity in a country. But only 14% of the difference in targeting across different countries can be explained by these factors.