The world bank has released a policy research working paper in April 2014 titled “Do Poverty Traps Exist” authored by two researchers Aart Kraay and David McKenzie. The full paper can be downloaded at the link below :
Do Poverty Traps Exist?
Download at the link below :
This paper reviews the empirical evidence on the existence of poverty traps, understood as self-reinforcing mechanisms through which poor individuals or countries remain poor. Poverty traps have captured the interest of many development policy makers, because poverty traps provide a theoretically coherent explanation for persistent poverty. They also suggest that temporary policy
interventions may have long-term effects on poverty. However, a review of the reduced-form empirical evidence suggests that truly stagnant incomes of the sort predicted by standard models of poverty traps are in fact quite rare. Moreover, the empirical evidence regarding several canonical mechanisms underlying models of poverty traps is mixed.