Income Deficiency, Transfers, and Development: A Microeconomic Perspective

This paper attempts to examine the behaviour of households with particular reference to the Caribbean context. The Caribbean environment is one that is characterized by chronic unemployment and persistent poverty. Furthermore, major long-standing attempts to deal with these two problems are also characteristic of the Caribbean scenario. The primary concern within the region is with the living conditions of the vast majority of the people, referred to by C.Y. Thomas as the “poor and powerless.” The second level of concern in this paper is with the use of resources in programmes that are designed to eradicate poverty and unemployment. Since these programmes seem not to be working as expected, the question that we ask is whether they are in fact unintentionally contributing to the problem. Moreover, does this anomalous situation stem from making inappropriate assumptions about household behaviour? Given these concerns, our analysis suggests that if the Caribbean region is to ever escape the twin problems of persistent poverty and chronic unemployment, public policy should in fact attempt to encourage households to respond not merely to income deficiency but also to income insecurity.