Poverty traps are rare, but trappedness isn't

Isaak Mengesha and Debraj Roy

Papers from arXiv.org

Abstract: The persistence of poverty is not well explained by who is poor. We argue the relevant object of measurement is trappedness--expected escape time from deprivation--which varies systematically across institutional environments and is invisible to standard poverty indices. Using Markov chains estimated on twenty years of longitudinal data from 27 European countries, we show that countries with identical deprivation rates differ in escape times by up to fourfold. These differences are not explained by household characteristics alone: exogenous shocks reshape welfare landscapes differently across countries, with divergence tracking welfare regime architecture rather than household composition. The mechanism is behavioural: health constrains a household's capacity to convert income gains into durable welfare improvement. Income transfers without health improvement fail to reduce poverty-return risk; combined interventions are super-additive across 28 countries, and the gap widens with transfer size. These findings dissolve the long-running poverty trap debate--studies that rejected traps measured the wrong dimension; studies that found them captured one projection of a multidimensional dynamic process. Trappedness is continuous, multidimensional, and institutionally shaped.

Date: 2026-03
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