Hello and welcome to the eleventh episode of Theory of the Week, a weekly show from A Student’s Note where we explore a theory-esque concept each week.
Last time, we looked at how labour markets in developed economies can trap people in a secondary tier of precarious, low-paid work — not because of a lack of effort or ability, but because of structural conditions that are self-reinforcing. This week we are turning to developing countries, where the concept of poverty traps originates.
For this, we will look at a 2022 paper by Balboni and co-authors called « Why do people stay poor? », addressing the question of whether poverty can be explained through differences in fundamentals, such as abilities and so on, or in opportunities, that is, access to assets.
But let us begin from the beginning.
Sources
Balboni, C., Bandiera, O., Burgess, R., Ghatak, M., & Heil, A. (2022). Why Do People Stay Poor? The Quarterly Journal of Economics, 137(2), 785–844.
Banerjee, A. V., & Duflo, E. (2007). The Economic Lives of the Poor. Journal of Economic Perspectives, 21(1), 141–167.
Kraay, A., & McKenzie, D. (2014). Do Poverty Traps Exist? Assessing the Evidence. Journal of Economic Perspectives, 28(3), 127–148.
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