Poverty Traps, Safety Nets and Sustainability Chris Barrett Robin Hill Seminar Cornell University  April 28, 2005

Why is poverty so persistent? The design of appropriate strategies to combat poverty depends on its origins. Is poverty something … … purely transitory? … implies laissez-faire. … all people naturally grow out of in time (unconditional convergence)? … implies laissez-faire /macro focus. … some people grow out of in time (conditional convergence)? … implies need for cargo nets. … some people can be trapped perpetually (poverty traps due to multiple equilibria)? … implies need for safety nets and cargo nets.

Brief theoretical background: The slow convergence possibility Welfare Dynamics With Conditional Convergence Welfare Dynamics With Unconditional Convergence Pov. line W2 Well-beingt+1 Well-beingt Welfare Dynamics With Multiple Dynamic Equilibria High group Chronic poverty region ` Transitory poverty region Low group Key: unique, common path dynamics with a single stable dynamic equilibrium Key: unique path dynamics with a single stable dynamic equilibrium that differs among distinct groups or individuals Key: nonlinear path dynamics with multiple stable dynamic equilibria and at least one unstable dynamic equilibrium (threshold effect)

Practical implications of the theory These four alternative theoretical foundations for understanding persistent poverty carry very different policy implications. - need for/design of safety nets for asset protection - need for/methods of targeting cargo nets - prospective importance of social exclusion/isolation in keeping people from getting ahead Need to get a firmer handle on the nature, consequences and policy implications of persistent poverty. That’s the core objective of my research program.

Shocks, Traps and Safety Nets Expected herd dynamics conditional on rainfall conditions a) Bad rainfall conditions Shocks, Traps and Safety Nets Shocks may be central not only to shifts between long-run equilibria, but to their existence. Example: evidence from Boran pastoralists, southern Ethiopia. Anticipating and managing shocks is central to long-term poverty reduction.

Social Exclusion/Isolation “Social capital” and its dark side The puzzle of local vs. global effects on incomes Conflict: raiding and resources in the Horn of Africa Polarization, exclusion and isolation Safety nets and social invisibility in Sri Lanka, Ethiopia Differential network value in KwaZulu Natal Pest/weed control among smallholders Information networks among Malagasy traders and Ghanaian maize/pineapple producers

One Contentious Safety Net: Food Aid Current high-level dialogue on redesign of global food aid. Challenge for donors: focus on MDG #1: Present policies violate Tinbergen rule Ineffective at advancing other objectives Yet multiple objectives impair effectiveness Necessary food aid management improvements: “It’s the targeting, stupid!” Timing: information/early warning systems Procurement methods Monetization

Oikos: Sustainability and Poverty Ecology and economics have the same root: oikos (“household”). Connection is more than just etymological. Most of the world’s poor live in rural areas and depend heavily on the natural resource base. Coupled human-natural systems dynamics: Resource state affects productivity/wealth while human behavior affects resource conditions: nonlinear system w/feedback. Ecology has analogous concepts to poverty traps: resilience and multiple stable states. Matters to design of conservation strategies (Serengeti, Madagascar, soils, rangelands, etc.).

Thank you for your interest