The Economics of Poverty Traps and Persistent Poverty: An Asset-Based Approach

Abstract:     
Longitudinal data on household living standards open the way to a deeper analysis of the nature and extent of poverty. While a number of studies have exploited this type of data to distinguish transitory from more chronic forms of income or expenditure poverty, this paper develops an asset-based approach to poverty analysis that makes it possible to distinguish deep-rooted, persistent structural poverty from poverty that passes naturally with time due to systemic growth processes. Drawing on the economic theory of poverty traps and bifurcated accumulation strategies, this paper briefly discusses some feasible estimation strategies for empirically identifying poverty traps and long term, persistent structural poverty. We also propose an extension of the Foster-Greer Thorbecke class of poverty measures to provide a natural measure of long-term welfare status. The paper closes with reflections on how asset-based poverty can be used to underwrite the design of persistent poverty reduction strategies.

working papers series