Social Transfers

Development Economics

November 7, 2024

Why Do People Stay Poor (2022)

• Are people poor because of traits or choices that make them unsuitable for generating wealth, despite the same opportunities?
• Or are there "poverty traps" that limit opportunity and maintain their relative economic position?
• Telling these explanations apart is hard because their outcomes are the same in equilibrium
• What if we suddenly moved some people from poverty to wealth?
• Authors establish the poverty trap threshold and S-shaped pattern
• Those below the threshold after receiving the transfer more likely to be in poverty in both the short and long run

Social Transfers

Development Economics

November 7, 2024

Why Do People Stay Poor (2022)

Social Transfers

Development Economics

November 7, 2024

Why Do People Stay Poor (2022)

Social Transfers

Development Economics

November 7, 2024

Why Do People Stay Poor (2022)

Social Transfers

Development Economics

November 7, 2024

Why Do People Stay Poor (2022)

Social Transfers

Development Economics

November 7, 2024

Why Do People Stay Poor (2022)

16% gain if over threshold

14% loss if under threshold

Social Transfers

Development Economics

November 7, 2024

Why Do People Stay Poor (2022)

Productivity difference sustains in the long run

Social Transfers

Development Economics

November 7, 2024

Why Do People Stay Poor (2022)

The fiscal cost of permanently getting people out of poverty through a large, time-limited transfer might therefore be lower than relying on continual transfers that raise consumption but have no effect on the occupations of the poor."