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For those who want a TL;DR, below is an extract of the summary. I think they did a good job, the article was well written. Poverty traps are one of the most fu
by abhinav22 6y ago
For those who want a TL;DR, below is an extract of the summary. I think they did a good job, the article was well written.
Poverty traps are one of the most fundamental concepts in development economics. The contri- bution of this paper has been to provide evidence for their existence using the combination of a randomized asset transfer and an 11 year follow up in rural Bangladesh. Our key finding is that people stay poor because they lack opportunity. It is not their intrinsic characteristics that trap people in poverty but rather their circumstances. This has three implications for how we think about development policy.
The first is that big pushes that enable occupational change will be needed to address the global mass poverty problem. Small pushes will work to elevate consumption but will not get people out of the poverty trap. The magnitude of the transfer needed to achieve occupational change may be much larger than is typical with current interventions though importantly it can be time limited. Therefore the fiscal cost of permanently getting people out of poverty through a large, time limited transfer might actually be lower than relying on continual transfers that raise consumption but have no effect on the occupations of the poor.
The second is that big push policies can have long-lasting effects. Our analysis of long-run dynamics indicates that the asset, occupation and consumption trajectories of above threshold beneficiaries diverge from those of below threshold beneficiaries over time. This finding is impor- tant as it indicates that, by engendering occupational change, one time pushes can have permanent effects.
The third is that poverty traps create mismatches between talent and jobs. We have shown that misallocation of labor is rife amongst the poor in rural Bangladesh. Indeed, we show that the vast majority of the poor in rural Bangladesh are not engaged in the occupations where they would be most productive. They are perfectly capable of taking on the occupations of the richer women but are constrained from doing so by a lack of resources. The value of eliminating misallocation is an order of magnitude larger than the cost of moving all the beneficiaries past the threshold. This is important as it implies that poverty traps are preventing people from making full use of their abilities and indeed it is the mass squandering of people’s abilities that is the key tragedy of mass poverty.
- sul_tasto 6y agoIf only there was some person or some group to realign society and correctly place everyone according to ability.
- postingpals 6y agoFor those that are inevitably about to argue and downvote the above... It seems the economy is returning, smartly, towards keynesian models because we've seen first hand how destructive the past 50 years of austerity and free market economics has become. Its clear to me that we need to have a strong government to save the economy from market failures, including but not limited to job guarantees echoing those of the new deal in the 30s. Don't have to be a marxist to see that.
- sul_tasto 6y agoI agree that there were great policies established under the new deal. I would caution advocating for blanket rescuing of the economy from market failures, though. The recent stimulus provided by the US congress to the airline industry is a perfect example of executives taking advantage of taxpayers. I would also push back against the idea that the last 50 years have been destructive economically.
- postingpals 6y agoAn example of a market failure is climate change, or at least many market failures are contained within this problem. Are you suggesting the government take a hands off approach to that? At the end of the day the government is necessary to the functioning of capitalism, we need to help people out of poverty so that among other things the economy can actually improve. That's all I'm arguing for, and I think there is undeniable proof of it at this point.
- sul_tasto 6y agoI completely agree with you on your point about climate change. I’m also not arguing for completely unregulated capitalism. I just think we need to be both smarter and more realistic about policy making. The 1% and corporations play both sides of the equation. At the same time, pulling down those who have been somewhat successful does nothing to fix poverty.
- 6y ago
- iridium_core 6y agoHow much of this is due to over-population? If the population of Bangladesh was 80 million instead of 160 million - giving each person access to theoretically double the amount of resources and land - would the net improvement be greater than 2x? What about 40 million - would the improvement be 4x? The solution may ultimately be a one-child policy, as demonstrated successfully by China.
- postingpals 6y agoChina's policy wasn't all that successful https://en.wikipedia.org/wiki/Missing_women_of_China https://en.wikipedia.org/wiki/Missing_women_of_China Population control is a very outdated idea, we have enough resources for the population, we just don't know how to distribute them using free market models.
- inglor_cz 6y ago"we have enough resources for the population, we just don't know how to distribute them using free market models. " That strikes me as improbable. Globally, you might be right - there is, for example, enough fresh water on the planet for many more people than are alie today. But moving a lake from thinly populated Canadian wilderness to Niger or Burkina Faso, where the needy populations are, is not technically possible. And vice versa, Sahara would be a perfect place to generate solar electricity, but the North European populations that would gladly consume it in the winter are too far away.
- postingpals 6y agoIt's a big topic to get into, but what I really mean is there are certain resources that we either throw away or don't distribute that wouldn't require relocation, and could be given to people without needing to police them for having kids or whatever. Do you not think Nigeria and Bangladesh have this problem as well? It's not just the developed world. Underdeveloped countries have resource allocation problems and definitely have excess resources in some cases.
- lotsofpulp 6y ago
- fl0tingh0st 6y agoWas searching for this. Thank you for writing.
- deleted 6y ago[deleted]