Is There a Trade-Off Between the Efficiency and Effectiveness Goals of Income Transfer Programs?

Abstract

Across countries the aims of transfer policy and the instruments used to affect these policies vary significantly. Moreover, within each country there are tensions between effectiveness goals (minimizing poverty and inequality) and efficiency goals maximizing the impact of given levels of resources). This paper develops a series of measures which capture these cross-national differences in order to examine whether there are trade-offs between efficiency and effectiveness goals, and whether these patterns can be related to a wider understanding of different welfare state regimes. The findings presented here suggest that there is a strong trade-off between efficiency and effectiveness, when considered in relation to the income inequality goal; while the evidence is mixed in relation to the poverty alleviation goal.