Why do people stay poor?

Clare A. Balboni, Oriana Bandiera, Robin Burgess, Maitreesh Ghatak and Anton Heil

No 29340, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: There are two broad views as to why people stay poor. One emphasizes differences in fundamentals, such as ability, talent or motivation. The other, the poverty traps view, differences in opportunities which stem from access to wealth. To test between these two views, we exploit a large-scale, randomized asset transfer and an 11-year panel on 6000 households who begin in extreme poverty. The setting is rural Bangladesh and the asset is cows. The data supports the poverty traps view - we identify a threshold level of initial assets above which households accumulate assets, take on better occupations (from casual labor in agriculture or domestic services to running small livestock businesses) and grow out of poverty. The reverse happens for those below the threshold. Structural estimation of an occupational choice model reveals that almost all beneficiaries are misallocated in the work they do at baseline and that the gains arising from eliminating misallocation would far exceed the program costs. Our findings imply that large transfers which create better jobs for the poor are an effective means of getting people out of poverty traps and reducing global poverty.

JEL-codes: I32 J22 J24 O12 (search for similar items in EconPapers)
Date: 2021-10
New Economics Papers: this item is included in nep-cwa, nep-fdg and nep-lma
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Citations: View citations in EconPapers (16)

Published as Clare Balboni & Oriana Bandiera & Robin Burgess & Maitreesh Ghatak & Anton Heil, 2022. "Why Do People Stay Poor?," The Quarterly Journal of Economics, vol 137(2), pages 785-844.

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Related works:
Journal Article: Why Do People Stay Poor? (2023)
Working Paper: Why do people stay poor? (2022)
Working Paper: Why Do People Stay Poor? (2020)
Working Paper: Why do people stay poor? (2020)
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