Working Paper: NBER ID: w22626
Authors: Paulo Santos; Christopher B. Barrett
Abstract: This paper studies the causal mechanisms behind persistent poverty. Using original data on Boran pastoralists of southern Ethiopia, we find that heterogeneous and nonlinear wealth dynamics arise purely in adverse states of nature. In favorable states, expected herd grow is quasi-linear and universal. We further show that those with lower herding ability, as reflected in past herd growth data, converge to a unique equilibrium at a small herd size while those with higher ability exhibit multiple stable dynamic wealth equilibria.
Keywords: Poverty Traps; Wealth Dynamics; Risk Management; Herding Ability; Pastoralists
JEL Codes: O10; O12; Q12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| adverse states of nature (H84) | nonlinear wealth dynamics (C69) |
| favorable conditions (P17) | quasilinear expected herd growth (C51) |
| low herding ability (C92) | convergence to unique equilibrium at small herd size (C62) |
| high herding ability (C92) | multiple stable dynamic equilibria (C62) |
| adverse weather shocks (Q54) | significant variation in expected herd dynamics (C92) |
| herding ability (C92) | expected wealth outcomes (G40) |
| low-ability herders (C92) | decline into poverty (I32) |
| high-ability herders (C92) | maintain or grow wealth (E21) |