Abstract
Do poverty traps exist? This question is central to development economics as it implies initial conditions can have lasting effects on long-run prosperity. I estimate the existence and prevalence of poverty traps using harmonized microdata from 27 randomized controlled trials covering 75,000 households. By estimating how poor households’ assets evolve over time, accounting for differences in their ability and consumption-savings decisions, I find that poverty traps are widespread: 60% of studies show signs of them. Yet within a study, on average, only 25% of households are actually trapped. This is driven by differences in productivity and forward-looking consumption responses which allow households to preemptively invest and escape low-asset states. A calibrated household growth model shows that optimal transfers target the poorest, not those near the trap threshold, in over 95% of contexts.
The seminar will be held in room 1249 (12th floor) at Eilert Sundts Hus. The address is Moltke Moes vei 31.