Do Poverty Traps Exist? Assessing the Evidence

A "poverty trap" can be understood as a set of self-reinforcing mechanisms whereby countries start poor and remain poor: poverty begets poverty, so that current poverty is itself a direct cause of poverty in the future. The idea of a poverty trap has this striking implication for policy: m...

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Main Authors:	Kraay, Aart, McKenzie, David
Format:	Journal Article
Language:	en_US
Published:	American Economic Association 2014
Subjects:	wealth poverty analysis poverty measurement well-being income distribution poverty traps migration
Online Access:	http://hdl.handle.net/10986/20540

id	okr-10986-20540
recordtype	oai_dc
spelling	okr-10986-205402021-04-23T14:03:56Z Do Poverty Traps Exist? Assessing the Evidence Kraay, Aart McKenzie, David wealth poverty analysis poverty measurement well-being income distribution poverty traps migration A "poverty trap" can be understood as a set of self-reinforcing mechanisms whereby countries start poor and remain poor: poverty begets poverty, so that current poverty is itself a direct cause of poverty in the future. The idea of a poverty trap has this striking implication for policy: much poverty is needless, in the sense that a different equilibrium is possible and one-time policy efforts to break the poverty trap may have lasting effects. But what does the modern evidence suggest about the extent to which poverty traps exist in practice and the underlying mechanisms that may be involved? The main mechanisms we examine include S-shaped savings functions at the country level; "big-push" theories of development based on coordination failures; hunger-based traps which rely on physical work capacity rising nonlinearly with food intake at low levels; and occupational poverty traps whereby poor individuals who start businesses that are too small will be trapped earning subsistence returns. We conclude that these types of poverty traps are rare and largely limited to remote or otherwise disadvantaged areas. We discuss behavioral poverty traps as a recent area of research, and geographic poverty traps as the most likely form of a trap. The resulting policy prescriptions are quite different from the calls for a big push in aid or an expansion of microfinance. The more-likely poverty traps call for action in less-traditional policy areas such as promoting more migration. 2014-11-18T20:47:21Z 2014-11-18T20:47:21Z 2014-07 Journal Article Journal of Economic Perspectives http://hdl.handle.net/10986/20540 en_US CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo American Economic Association American Economic Association Publications & Research :: Journal Article
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	en_US
topic	wealth poverty analysis poverty measurement well-being income distribution poverty traps migration
spellingShingle	wealth poverty analysis poverty measurement well-being income distribution poverty traps migration Kraay, Aart McKenzie, David Do Poverty Traps Exist? Assessing the Evidence
description	A "poverty trap" can be understood as a set of self-reinforcing mechanisms whereby countries start poor and remain poor: poverty begets poverty, so that current poverty is itself a direct cause of poverty in the future. The idea of a poverty trap has this striking implication for policy: much poverty is needless, in the sense that a different equilibrium is possible and one-time policy efforts to break the poverty trap may have lasting effects. But what does the modern evidence suggest about the extent to which poverty traps exist in practice and the underlying mechanisms that may be involved? The main mechanisms we examine include S-shaped savings functions at the country level; "big-push" theories of development based on coordination failures; hunger-based traps which rely on physical work capacity rising nonlinearly with food intake at low levels; and occupational poverty traps whereby poor individuals who start businesses that are too small will be trapped earning subsistence returns. We conclude that these types of poverty traps are rare and largely limited to remote or otherwise disadvantaged areas. We discuss behavioral poverty traps as a recent area of research, and geographic poverty traps as the most likely form of a trap. The resulting policy prescriptions are quite different from the calls for a big push in aid or an expansion of microfinance. The more-likely poverty traps call for action in less-traditional policy areas such as promoting more migration.
format	Journal Article
author	Kraay, Aart McKenzie, David
author_facet	Kraay, Aart McKenzie, David
author_sort	Kraay, Aart
title	Do Poverty Traps Exist? Assessing the Evidence
title_short	Do Poverty Traps Exist? Assessing the Evidence
title_full	Do Poverty Traps Exist? Assessing the Evidence
title_fullStr	Do Poverty Traps Exist? Assessing the Evidence
title_full_unstemmed	Do Poverty Traps Exist? Assessing the Evidence
title_sort	do poverty traps exist? assessing the evidence
publisher	American Economic Association
publishDate	2014
url	http://hdl.handle.net/10986/20540
_version_	1764445775130001408

Do Poverty Traps Exist? Assessing the Evidence

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