Working Paper: NBER ID: w29340
Authors: Clare A. Balboni; Oriana Bandiera; Robin Burgess; Maitreesh Ghatak; Anton Heil
Abstract: There are two broad views as to why people stay poor. One emphasizes differences in fundamentals, such as ability, talent or motivation. The other, the poverty traps view, differences in opportunities which stem from access to wealth. To test between these two views, we exploit a large-scale, randomized asset transfer and an 11-year panel on 6000 households who begin in extreme poverty. The setting is rural Bangladesh and the asset is cows. The data supports the poverty traps view - we identify a threshold level of initial assets above which households accumulate assets, take on better occupations (from casual labor in agriculture or domestic services to running small livestock businesses) and grow out of poverty. The reverse happens for those below the threshold. Structural estimation of an occupational choice model reveals that almost all beneficiaries are misallocated in the work they do at baseline and that the gains arising from eliminating misallocation would far exceed the program costs. Our findings imply that large transfers which create better jobs for the poor are an effective means of getting people out of poverty traps and reducing global poverty.
Keywords: No keywords provided
JEL Codes: I32; J22; J24; O12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| below asset threshold (G32) | slide back into poverty (I32) |
| above asset threshold (G32) | accumulate assets (D14) |
| elimination of misallocation (D61) | significant gains (O52) |
| initial asset levels (G19) | poverty traps (I32) |
| asset ownership (H82) | occupational choices (J29) |
| asset ownership (H82) | poverty outcomes (I32) |
| initial asset levels (G19) | trajectory post-intervention (C32) |