New Research on Poverty Traps

Come to think of it, one of the most basic question of Development Economics has to be: why does poverty persist, i.e., why do (some of) the poor stay poor?

I am very excited about some recent research I have been doing with my LSE colleagues Oriana Bandiera and Robin Burgess, and two of our students, Clare Balboni and Anton Heil, that combines theory and data from a randomised control trial from the BRAC ultra-poor project in Bangladesh to answer the following question - can a one-time push get the poor out of poverty or is it something more systemic?

In other words, we try to test between a "poverty trap" view vs a "bad fundamentals" view of poverty. According to the former, poverty is a vicious cycle that can be broken by a "push" that will help the poor to reach a better self-sustaining equilibrium. According to the latter view, the poor do reach their potential as opposed to staying trapped in a bad equilibrium, but because of bad economic fundamentals (low human capital, bad infrastructure) this potential is very limited.

Here are the slides of Oriana Bandiera's Kapuscinski Development Lecture delivered recently at the University of Barcelona where she discusses some of this work, along with her other related work on the topic.