According to World Bank, Data from the report shows that safety nets—which include cash, in-kind transfers, social pensions, public works, and school feeding programs targeted to poor and vulnerable households—also lower inequality, and reduce the poverty gap by about 45 percent, even if they do not emerge from poverty. These positive effects of safety net transfers hold true for low and middle-income countries alike.
Developing and transition countries spend an average of 1.5 percent of GDP on safety net programs. Europe and Central Asia currently spend the most, with average spending of 2.2 percent of GDP; Sub-Saharan Africa and Latin America and the Caribbean regions are in the middle of the spending range; and the Middle East and North Africa and South Asia regions spend the least, at 1.0 percent and 0.9 percent, respectively. A growing commitment to safety nets is also evident; many countries tend to spend more on these programs over time. The increase in spending has translated into a substantial increase in program coverage around the world.
The analysis also shows that on average, all types of programs tend to favor the poor. Despite the progress that has been made, significant gaps in program coverage persist, especially in poor countries. What factors affect the impact of safety nets on poverty and inequality?
The extent to which safety net transfers have an impact on poverty and inequality depends on factors such as the program’s coverage, transfer level, and beneficiary incidence. Policymakers need to pay attention to the interaction of these factors when designing policies to reduce poverty and inequality. High coverage levels paired with high benefit levels lead to higher outcomes in poverty and inequality reduction. What have old-age pensions accomplished? Old-age social pensions provide an alternative source of income for elderly adults who are not covered by contributory schemes.