CONCLUSIONS

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PRC has made enormous strides in poverty reduction over the last 25 years,

despite the continuing disputes in the literature on the precise magnitude

of remaining poverty and the extent of its decline over time. Since the

mid-1980s there has been a consistent targeted poverty reduction program,

although central government expenditures, which are the only component

for which there is comprehensive data, have never exceeded 6 per cent of total

government expenditure. The central focus of targeting has been location

targeting, based on poor counties, and the within-county allocations have

been determined in a variety of ways, not all of which have been based on

objective need. There is also substantial evidence of errors in poor county

designations, which appear to have increased in the early 1990s with the

addition of new counties to the list. There was competition for access to these

funds and the ensuing political pressures worsened targeting accuracy at

this time. The limited evidence available implies that access to poverty funds

did have a positive effect in counteracting the unfavorable geographic and

social conditions faced by many poor areas. Their incomes may have grown

more slowly than in higher income areas, but their relative disadvantage

was reduced modestly by the availability of poverty funds. Despite this

positive conclusion we still know very little about how such funds affected

intra-county distribution between poor and non-poor and hence have little

conclusive evidence on their net effect on poverty reduction. There is in fact

substantial anecdotal evidence on the misuse of poverty funds. Finally, we

also know fairly conclusively that the main driver of poverty reduction has

been very rapid economic growth and through their growth effect other nonpoverty

investments have in fact had a major poverty reduction impact.