Abstract: Focuses on the equity-efficiency trade-off that is central to the analysis of poverty, looking in particular at cases in which a consideration of aspects such as information, externalities, and transaction costs reveals the trade-off to be false or exaggerated. A brief note on the measurement of poverty is followed by a discussion on the trickle-down effect of growth and on the linkage between redistribution and growth. Next, asset redistribution policies such as land reforms with tax-transfer policies in terms of efficiency are compared, and a model with private information where a lump-sum transfer is shown to be superior to a credit –subsidy is presented. Then, the targeting and cost-effectiveness of government transfer programmes are discussed, with the focus on programmes that work through self-selection and on the externalities involved in group- or area-specific targeting. Finally, governance structure and role of decentralization through local self-governing institutions in improving policy effectiveness are considered.

Keywords: efficiency, equity, governance, poverty, redistribution, self-selection, subsidies, targeting, tax, trickle-down,