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Poverty Traps and Safety Nets Image

Promoting Inclusive Markets and Financial Systems

Poverty Traps and Safety Nets

Poverty Traps and Safety Nets

Summary

This paper explores three interrelated questions that have been central to Erik’s past research and his current concerns: What is the etiology of chronic poverty and vulnerability? How does nutrition-related health risk affect patterns of chronic poverty and vulnerability? What are the implications for the design of development policy, especially safety net interventions? In recent years, economists have spilled much ink over both risk management and poverty analysis. Yet integration of these topics has remained distressingly limited. Most of the recent empirical development microeconomics research on risk has focused on variability in incomes or expenditures, the extent to which some portion of that variability might be uninsured among poor subpopulations, and the means by which insurance emerges. One of the main findings of this line of research is the rejection of the neoclassical consumption smoothing hypothesis. Meanwhile, the lion’s share of recent poverty analysis has focused on technical issues surrounding poverty measurement, on the relationship between poverty and economic growth, and on poverty dynamics. In this paper, we seek to integrate these two threads explicitly.

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