The Impact of Adjustment-Related Social Funds on Income Distribution and Poverty

Giovanni Andrea Cornia and Sanjay G. Reddy

in Inequality Growth and Poverty in an Era of Liberalization and Globalization

Published in print March 2004 | ISBN: 9780199271412
Published online August 2004 | e-ISBN: 9780191601255 | DOI:

Series: WIDER Studies in Development Economics

 The Impact of Adjustment-Related Social Funds on Income Distribution and Poverty

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Most poverty and income inequality has deep‐rooted causes that can be removed only by structural (and often slow) interventions, although it is now increasingly evident that structural adjustment, premature financial liberalization, and uncontrolled globalization can exacerbate poverty by inducing protracted recessions and macroeconomic instability. One of the dominant responses to these policy‐induced problems has been the establishment of temporary social safety nets, of which the most popular type is known as ‘social funds’; these have become a prime policy choice for offsetting the social impact of policy reform. This chapter assesses the performance of social funds, arguing that have played a minor role in containing the social costs arising from liberalization policies and in reducing the number of unemployed, ‘adjustment poor’, and ‘chronic poor’. In addition, the emphasis placed on short‐term social funds may have diverted resources and the attention of policy‐makers from the extension and reform of standing social security arrangements that may more effectively address both chronic and adjustment‐induced poverty. The six sections of the chapter are: Introduction; The Historical Context Leading to the Mass Introduction of Social Funds; Adjustment‐Related Social Funds: Scale, Scope, and Structure; Effects on Incomes, Income Distribution, and Poverty: Macroperspective; Effects on Incomes, Income Distribution, and Poverty: Microperspectives; and Conclusions and Recommendations.

Keywords: adjustment‐induced poverty; Adjustment‐Related Social Funds; financial liberalization; globalization; Income Distribution; income inequality; inequality; liberalization; poverty; social funds; social policy; social safety nets; social security; structural adjustment; unemployment

Chapter.  12048 words. 

Subjects: Economic Development and Growth

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