Poverty Traps,Safety Nets andSustainability

Chris BarrettRobin Hill SeminarCornell University 

April 28, 2005

Why is poverty so persistent?

The design of appropriate strategies to combat poverty depends on its origins.

Is poverty something …… purely transitory? … implies laissez-

faire.… all people naturally grow out of in time (unconditional convergence)? … implies laissez-faire /macro focus.… some people grow out of in time

(conditional convergence)? … implies need for cargo nets.… some people can be trapped

perpetually (poverty traps due to multiple equilibria)? … implies need for safety nets and cargo nets.

Pov.line

W2

W2

Well-beingt+1

Well-beingt

Brief theoretical background:The slow convergence possibility

Welfare Dynamics With Unconditional Convergence

Key: unique, common path dynamics with a single stable dynamic equilibrium

Welfare Dynamics With Conditional Convergence

Low group

High groupChronic poverty region

`

Transitory poverty region

Welfare Dynamics With Multiple Dynamic Equilibria

Key: unique path dynamics with a single stable dynamic equilibrium that differs among distinct groups or individuals

Key: nonlinear path dynamics with multiple stable dynamic equilibria and at least one unstable dynamic equilibrium (threshold effect)

Practical implications of the theory

These four alternative theoretical foundations for understanding persistent poverty carry very different policy implications.

- need for/design of safety nets for asset protection

- need for/methods of targeting cargo nets- prospective importance of social

exclusion/isolation in keeping people from getting ahead

Need to get a firmer handle on the nature, consequences and policy implications of persistent poverty. That’s the core objective of my research program.

Shocks, Traps and Safety Nets

Shocks may be central not only to shifts between long-run equilibria, but to their existence. Example: evidence from Boran pastoralists, southern Ethiopia.

Anticipating and managing shocks is central to long-term poverty reduction.

Social Exclusion/Isolation

“Social capital” and its dark side

- The puzzle of local vs. global effects on incomes- Conflict: raiding and resources in the Horn of

Africa- Polarization, exclusion and isolation

• Safety nets and social invisibility in Sri Lanka, Ethiopia

• Differential network value in KwaZulu Natal• Pest/weed control among smallholders• Information networks among Malagasy traders

and Ghanaian maize/pineapple producers

One Contentious Safety Net: Food Aid

Current high-level dialogue on redesign of global food aid.

Challenge for donors: focus on MDG #1: •Present policies violate Tinbergen rule• Ineffective at advancing other objectives•Yet multiple objectives impair effectiveness

Necessary food aid management improvements:•“It’s the targeting, stupid!”•Timing: information/early warning systems•Procurement methods•Monetization

Oikos: Sustainability and Poverty

Ecology and economics have the same root: oikos (“household”). Connection is more than just etymological.

•Most of the world’s poor live in rural areas and depend heavily on the natural resource base.

•Coupled human-natural systems dynamics: Resource state affects productivity/wealth while human behavior affects resource conditions: nonlinear system w/feedback.

•Ecology has analogous concepts to poverty traps: resilience and multiple stable states.

•Matters to design of conservation strategies (Serengeti, Madagascar, soils, rangelands, etc.).

Thank you for your interest