Ceriani, LidiaVerme, Paolo2013-12-022013-12-022013-02https://hdl.handle.net/10986/16327The paper develops a concept and a measure of the monetary capacity of a country to reduce its own poverty and shows how these tools can be used to guide budget allocations or the allocation of aid. The authors call this concept the income lever. Making use of tax and distributive theory, the paper shows how different redistributive criteria correspond to the different normative criteria of the income lever. It then constructs various income lever indexes based on these criteria and uses such indexes to rank countries according to their own capacity to reduce poverty. As shown in the empirical application, this methodology can provide an equitable tool to rank countries or regions when it comes to budget or aid allocations, whether it is the allocation of social funds within the European Union (North-North transfers) or the allocation of aid from rich to poor countries (North-South transfers). The findings indicate that the allocation of social funds in the European Union follows closely the rank that results from the income lever indexes proposed while the allocation of aid to Sub-Saharan African countries does not.en-USCC BY 3.0 IGOabsolute povertyabsolute poverty lineabsolute termsaffluenceagricultural developmentaid effectivenessAmerican Economic Reviewconsumer pricedeveloping countriesDevelopment EconomicsDevelopment Goalsdevelopment indicatorsdevelopment policyDevelopment Reporteconomic developmenteconomic growthEconomic ManagementEconomicsempirical applicationempirical evidenceempirical literatureequal countriesexchange rateExtreme PovertyFinancial Flowsfiscal stabilityglobal levelglobal povertygrowth effecthousehold consumptionhousehold sizehousehold surveyshuman rightsIncomeincome dataincome distributionincome distributionsincome levelsindividual countriesinequalityLiving Conditionslow incomelow income countrieslow-income countriesmarginal taxmarginal tax ratemeasurement of povertymicro datamiddle incomemiddle income countriesNational IncomePolicy ResearchPolitical Economypolitical instabilitypoorpoor areaspoor countriespoor individualspoor policiespopulation sharepoverty eradicationpoverty gappoverty gap indexpoverty incidencepoverty levelpoverty linePoverty measurementpoverty measurespoverty ratepoverty ratesPoverty Reductionpoverty targetPublic PolicyPurchasing PowerPurchasing Power ParityRedistribution Policiesredistributive policiesreducing povertyRegional CompetitivenessRegional DevelopmentRegional Development Fundregional policiesRegional Policyrich countriessocial fundsstructural vulnerabilitytargetingtaxationVolatilitywealthwelfare variableWorld EconomyWorld Bank10.1596/1813-9450-6367