Poverty Traps,

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Poverty Traps, Safety Nets and Sustainability
Chris Barrett Robin Hill Seminar Cornell
University  April 28, 2005
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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.
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Brief theoretical background The slow
convergence possibility
Welfare Dynamics With Unconditional Convergence
Welfare Dynamics With Conditional Convergence
Welfare Dynamics With Multiple Dynamic Equilibria

High group
Chronic poverty region

Transitory poverty region
Low group
Key unique, common path dynamics with a single
stable dynamic equilibrium
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)
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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. Thats the core objective of
  my research program.

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Shocks, Traps and Safety Nets
Expected herd dynamics conditional on rainfall
conditions a) Bad rainfall conditions
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.
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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

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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
• Its the targeting, stupid!
• Timing information/early warning systems
• Procurement methods
• Monetization

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Oikos Sustainability and Poverty

• Ecology and economics have the same root oikos
  (household). Connection is more than just
  etymological.
• Most of the worlds 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.).

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Thank you for your interest