![]() Further, the provision of micro-loans to poor households has shown little effect on average (Meager 2019) but typically benefits a small share of households that already own substantial assets (Banerjee et al. Farmers living in extreme poverty are more risk taking when close to an asset threshold value – behaviour consistent with trying to escape or avoid falling into a trap (Lybbert and Barrett 2011, Santos and Barrett 2011). ![]() There are also indirect pieces of evidence that taken together point to the empirical relevance of poverty traps in some contexts. (2004), and Santos and Barrett (2017) document threshold effects in assets and herd size. For example, analysing observational panel data of farmers and pastoralists in multiple countries, Jalan and Ravallion (2004), Lokshin and Ravallion (2004), Naschold (2013), and Arunachalam and Shenoy (2017) find no evidence of poverty threshold effects in income and wealth dynamics, while Adato et al. Identifying situations and groups for which poverty traps arise is an empirical task that has motivated a rich literature (Kraay and McKenzie 2014). In this view of poverty, one-time transfers will dissipate over time and regular income or consumption support is optimal. To the extent that these characteristics cannot be changed or compensated, the afflicted person is doomed to remain poor. In the second group, it is the innate characteristics of the individual or the economic environment in which they operate that cause poverty. If the cause of poverty is poverty itself, then large one-time investments such as asset transfers, trainings, or student loans are required to end poverty for good. 2020), and lumpy investments coupled with borrowing constraints. This is the so called ‘poverty trap’ view that theorists have studied extensively, highlighting channels ranging from savings behaviour, human capital, nutrition (Dasgupta 1997), physical and mental health (Ridley et al. ![]() In the first, it is poverty that causes poverty (Azariadis 1996). The causes of poverty can be broadly classified into two groups. Knowing the causes of poverty is essential because policies that are effective against one cause might be useless, if not harmful, against another. Knowing the causes of poverty is difficult because different causes produce the same outcome. To eliminate global poverty, we need to know what causes it.
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