Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor?...
Transcript of Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor?...
![Page 1: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/1.jpg)
Oriana Bandiera (LSE)with
Clare Balboni (MIT), Robin Burgess (LSE) , Maitreesh Ghatak (LSE) and Anton Heil (Berkeley)
Why Do People Stay Poor?
![Page 2: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/2.jpg)
Most of the global poor work
![Page 3: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/3.jpg)
Labor is the sole endowment of the poor → the link between jobs and poverty is key
Over 65% of workers (2bn people) are in low-productivity, informal jobs with low earnings (WB 2013)98% of agricultural wage employment in India is through casual jobs in spot markets (Kaur 2017)
Why do people stay poor?
![Page 4: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/4.jpg)
Do people stay poor because they are only able to do bad jobs or do they do bad jobs because they are poor?
We ask
![Page 5: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/5.jpg)
The idea of poverty traps (multiple steady states/ equilibria) has a long history in macro and micro development theory (Rosenstein-Rodan 43, Nelson 56, Dasgupta & Ray 86, Banerjee & Newman 93, Galor & Zeira 93, Azariadis 96, Azariadis & Stachurski 06, Ghatak 16)
Empirical investigations include calibrations with cross-country data (Graham & Temple 06), structural approaches with household data (Kabowski & Townsend 11), micro studies with observational data (Kraay & McKenzie 14, Lybbertet al 04, Barrett et al 06, Santos & Barrett 11)
Recent field experiments relating to big push approaches (Banerjee et al 19, Blattman et al 13, 19, Haushofer & Shapiro 16, 18 – see Banerjee 20 for an overview)
Poverty traps
![Page 6: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/6.jpg)
Is it because of productivity differences?
People (countries) are observed at two equilibria, H and L
Or poverty traps?
![Page 7: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/7.jpg)
In the first world people with the same productivity will reach the same steady state climb out of poverty no matter how low they startIn this world, anti-poverty policies support consumption
drip feeding transfers will help people climb the hillIn the second world, wealth at birth determines the steady state in this world there is no way out without a big pushIn this world, anti-poverty policies support production
a large increase in productive assets is needed to get out of the poverty trap
Finding the answer is key for policy
![Page 8: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/8.jpg)
We use the RCT of a large asset transfer program in Bangladesh and trace effects over 11 years to test directly for a poverty trapWe estimate a structural model of occupational choice to back out the implied misallocation
This paper
![Page 9: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/9.jpg)
Setting
Setting
![Page 10: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/10.jpg)
Study site: 23,000 HHs in 1,309 villages in Northern Bangladesh
Monga (famine) region: irregular demand for casual wage labor, higher grain prices, extreme poverty and food insecurity
![Page 11: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/11.jpg)
We collect a five wave panel over 11 years
Census100k HHs
Wave 123k HHs
Wave 223k HHs
Wave 323k HHs
Wave 423k HHs
Wave 56k HHs
TUP program in 50% randomly selected villages
TUP program in 50% control villages
2007 2007 2009 2011 2014 2018
![Page 12: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/12.jpg)
1. The poor stay poor3% poor control households reach median middle class assets
2. Hierarchy of jobs correlated with community-defined poverty
Poor casually employed in agriculture and domestic serviceRicher self-employed in livestock rearing and land cultivation
3. Better jobs require productive assetsProductive assets set apart rich and poor: 94 times higherRicher households own more expensive, indivisible assets
Poverty, occupational choice and assets
![Page 13: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/13.jpg)
Jobs and assets at baseline
![Page 14: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/14.jpg)
Fact 1: Key difference between classes is productive asset holdings
The picture can't be displayed.
![Page 15: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/15.jpg)
Fact 2: Occupational choice reflects differences in asset ownership
![Page 16: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/16.jpg)
Fact 3: More assets → more expensive assets
![Page 17: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/17.jpg)
Fact 4: Poor people stay poorLo
g pr
oduc
tive
asse
ts in
07,
09,1
1
Productive assets by class in control villages
![Page 18: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/18.jpg)
Fact 5: The distribution of productive assets is bimodal
ln productive assets
![Page 19: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/19.jpg)
Setting
Test
![Page 20: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/20.jpg)
Randomly allocated across areasBeneficiaries are the poorest women in these villagesProgram transfers a large asset (a cow) and training Value of the asset = 1 year of PCE (5x typical microloan)
BRAC’s Targeting the Ultra-Poor program
![Page 21: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/21.jpg)
Program moves the poorest into the lowest density area
0-1.6 2.1-2.7
ln productive assets
![Page 22: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/22.jpg)
After transfer
ln productive assets
![Page 23: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/23.jpg)
Shocks of this magnitude are very rare
![Page 24: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/24.jpg)
Poverty traps and differential productivity are observationally equivalent in steady stateBut they produce different transition equationsA necessary condition for poverty traps is that the transition equation is not concave
Test using fact beneficiaries differ slightly in baseline assetsExploit to estimate transition equation from 𝑘𝑘2007 to 𝑘𝑘2011Test predictions of poverty trap model up to 11 years post-transfer
Our test
![Page 25: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/25.jpg)
Identification is based on differences in initial assets that are extremely small relative to the transfer but not randomized → consider evidence in support of identifying assumption
1. Endogenous shocks • k0 correlated with shocks to Δk• Placement is randomized → use controls to account for
shocks
2. Endogenous program responses• k0 correlated with response to the program• Use different source of variation to compare those with
same k0: kt+1 = sf(A, kt) + (1- δ)kt
Higher s → lower threshold, higher A → lower threshold
Identification
![Page 26: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/26.jpg)
Identification is based on differences in initial assets that are extremely small relative to the transfer but not randomized → consider evidence in support of identifying assumption
1. Endogenous shocks • k0 correlated with shocks to Δk• Placement is randomized → use controls to account for
shocks
2. Endogenous program responses• k0 correlated with response to the program• Use different source of variation to compare those with
same k0: kt+1 = sf(A, kt) + (1- δ)kt
Higher s → lower threshold, higher A → lower threshold
Identification
![Page 27: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/27.jpg)
Identification is based on differences in initial assets that are extremely small relative to the transfer but not randomized → consider evidence in support of identifying assumption
1. Endogenous shocks • k0 correlated with shocks to Δk• Placement is randomized → use controls to account for
shocks
2. Endogenous program responses• k0 correlated with response to the program• Use different source of variation to compare those with
same k0: kt+1 = sf(A, kt) + (1- δ)kt
Higher s → lower threshold, higher A → lower threshold
Identification
![Page 28: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/28.jpg)
Setting
Findings
![Page 29: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/29.jpg)
The transition equation without and with a poverty trap
![Page 30: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/30.jpg)
The transition equation is S-shaped
�𝒌𝒌=2.34
![Page 31: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/31.jpg)
Parametric identification gives similar answers
�𝒌𝒌=2.34
�𝒌𝒌=2.36
![Page 32: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/32.jpg)
K^ is unstable: Δk<0 to the left, Δk>0 to the right
Δk
![Page 33: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/33.jpg)
Transition equation in control villages
![Page 34: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/34.jpg)
What does the difference in assets correspond to?
![Page 35: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/35.jpg)
Cannot be explained by common shocks correlated with k0
![Page 36: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/36.jpg)
Measure earnings potential using returns to cows in different villages
Individual thresholds I: earnings potential
![Page 37: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/37.jpg)
Instrument for savings rate using dependency ratio
Individual thresholds II: savings potential
![Page 38: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/38.jpg)
Poverty traps using variation in thresholds
![Page 39: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/39.jpg)
Setting
Long run
![Page 40: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/40.jpg)
Differences in productive assets grow over time
![Page 41: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/41.jpg)
Change in composition of assets
![Page 42: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/42.jpg)
Average gap in consumption increases
Initially negative as those above threshold save to buy
assets
![Page 43: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/43.jpg)
Average gap in hours worked
![Page 44: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/44.jpg)
Over 11 years, life cycle savings also affect asset stocksAsset dynamics reflect convergence to steady state and aging
Both lead to decreasing assets below thresholdCountervailing forces above threshold
Evident above and below threshold but differences persistStronger effects for younger beneficiaries: those above threshold 20pp more likely to grow assets by year 11
Life cycle effects
![Page 45: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/45.jpg)
Differences persist and inequality increases over time
![Page 46: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/46.jpg)
Setting
Structural Estimation
![Page 47: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/47.jpg)
Aims of structural analysis
Reduced form findings suggest ultra-poor not in their first best occupation given their productivity and preference parameters
Use structural estimation of model of occupational choice to:Estimate individual-level productivity and cost of effort parametersDetermine optimal occupations in absence of capital constraintsQuantify extent of misallocation at baseline
![Page 48: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/48.jpg)
Steps of structural analysis
Develop simple model of individual occupational choice
Calibrate individuals’ productivity and labor disutility parameters from baseline and year 2 data
unique feature: at t=0 they can only do wage labor, at t=2 they must try out livestock no selection
Evaluate model performance using year 4 data
Simulate the model to estimate each individual’s optimal steady-state occupational choice and quantify misallocation at baseline
![Page 49: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/49.jpg)
Estimating misallocation
• Assume ultra-poor had assets = upper mode
• Use model to estimate optimal occupation
Compute payoff at actual occupation
1 2
Total misallocation value:$15 million pa
Total cost of transfers needed to bring all above the threshold:
$1 million one-off
• Compute payoff at optimal occupation
![Page 50: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/50.jpg)
Quantifying misallocation
Model suggests 96% of individuals are misallocated at baseline
Estimated total value of misallocation across all HHs 15 times larger than transfers needed for all HHs to escape the trap
Value of misallocation >> cost of eliminating trap robust with:
General equilibrium price effectsDoubling of wage rateHalving disutility of wage labor
![Page 51: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/51.jpg)
Setting
Policy
![Page 52: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/52.jpg)
A big problem requires a big solution
�𝒌𝒌
![Page 53: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/53.jpg)
A big problem requires a big solution
Mic
rolo
an
100
$ PP
P
Mic
rolo
an
200
$ PP
P
NR
EGA
Peru
*In
dia*
Gha
na*
Paki
stan
*
Hon
dura
s*
Blat
tman
et a
l. (2
014)
* Country names refer to study sites in Banerjee et al. (2015)
�𝒌𝒌
![Page 54: Why Do People Stay Poor? - London School of Economics · 2020. 10. 13. · Why Do People Stay Poor? Most of the global poor work. Labor is the sole endowment of the poor → the link](https://reader033.fdocuments.in/reader033/viewer/2022060909/60a39fb0928dab096a6a48e5/html5/thumbnails/54.jpg)
Poor people are not unable to take on more productive employment activities, they just lack the required capital Misallocation results suggest lack of opportunity prevents 96% from engaging in optimal occupationThe existence of a poverty threshold implies that only transfers large enough to push beneficiaries past the threshold will reduce poverty in the long runKey policy conclusion – to tackle persistent poverty, need big push policies that tap into the talents of the poor rather than just propping up their consumption
Conclusions