Public policy to address poverty relies on which mechanism?

• A. Universal basic income funded by taxes
• B. Broad universal subsidies for all households
• C. Targeted cash transfers and social development programs
• D. Deregulation of social services

Answer: (C)

Targeted cash transfers paired with social development programs are the most effective mechanism for reducing poverty. By directing transfers to those who need them most (often through means testing), governments provide immediate relief to households living in poverty and prevent extreme hardship. When these cash transfers are combined with investments in health, education, and other development services, they help build human capital, which can lift families out of poverty over the long run and reduce future dependence on aid.

Universal approaches, like broad universal subsidies or universal basic income, spread benefits across everyone, which can be efficient in some cases but often costs more and reaches people who may not need assistance. Deregulating social services would typically weaken protections for the poor and make it harder to provide consistent support. Mexico’s experience with targeted cash transfers tied to health and education programs illustrates how combining direct support with developmental services can both address immediate needs and promote lasting improvements.