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Poverty Traps

Poverty Traps

Samuel Bowels
Steven N. Durlauf
Karala Hoff
Copyright Date: 2006
Pages: 256
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  • Book Info
    Poverty Traps
    Book Description:

    Much popular belief--and public policy--rests on the idea that those born into poverty have it in their power to escape. But the persistence of poverty and ever-growing economic inequality around the world have led many economists to seriously question the model of individual economic self-determination when it comes to the poor. InPoverty Traps, Samuel Bowles, Steven Durlauf, Karla Hoff, and the book's other contributors argue that there are many conditions that may trap individuals, groups, and whole economies in intractable poverty. For the first time the editors have brought together the perspectives of economics, economic history, and sociology to assess what we know--and don't know--about such traps.

    Among the sources of the poverty of nations, the authors assign a primary role to social and political institutions, ranging from corruption to seemingly benign social customs such as kin systems. Many of the institutions that keep nations poor have deep roots in colonial history and persist long after their initial causes are gone.

    Neighborhood effects--influences such as networks, role models, and aspirations--can create hard-to-escape pockets of poverty even in rich countries. Similar individuals in dissimilar socioeconomic environments develop different preferences and beliefs that can transmit poverty or affluence from generation to generation. The book presents evidence of harmful neighborhood effects and discusses policies to overcome them, with attention to the uncertainty that exists in evaluating such policies.

    eISBN: 978-1-4008-4129-5
    Subjects: Economics, Sociology, Business

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
    (pp. vii-x)
    Samuel Bowles, Steven N. Durlauf and Karla Hoff
    (pp. 1-14)
    Samuel Bowles, Steven N. Durlauf and Karla Hoff

    There is a conventional view about poverty that still informs much public debate. It is famously illustrated by the rags-to-riches stories of the nineteenth-century American author, Horatio Alger. He penned more than one hundred such tales, nearly all best sellers. Every hero in an Horatio Alger novel, no matter how dire his straits at the beginning, escapes poverty by dint of effort, ability, and inner strength.

    The Horatio Alger vision resonates with the sort of society most Americans want and, to a large extent, believe has been achieved. What is critical in this view is the idea that the mechanisms...

  5. Part One Threshold Effects

    • Chapter 1 THE THEORY OF POVERTY TRAPS What Have We Learned?
      (pp. 17-40)
      Costas Azariadis

      This chapter starts from the premise that the theory of economic growth should explain the fundamental facts of world economic development in a unified way and with a minimum of institutional detail. One undeniably key fact in our development experience since 1960 is that, except for East and Southeast Asia, less developed countries are not catching up with advanced capitalist nations in any meaningful sense. It is by now a wellknown regularity that both the world distribution of per capita incomes and the relevant growth rates exhibit an increased amount of polarity often called “club convergence” or “twin peaks.”¹


  6. Part Two Institutions

    • Chapter 2 THE PERSISTENCE OF POVERTY IN THE AMERICAS: The Role of Institutions
      (pp. 43-78)
      Stanley L. Engerman and Kenneth L. Sokoloff

      By conventional standards, the economies of Latin America and the Caribbean basin are overall failing to provide their populations with high levels of welfare. Many of these countries rank among the world’s poorest outside of Africa, per capita income in the region is lower than the world average, and the distributions of income are generally much more unequal in this part of the globe than in any other. For the most part, the least developed of these societies have small populations and are in Central America, the Caribbean basin, or the Andes. Among those with less than 60 percent of...

    • Chapter 3 PARASITES
      (pp. 79-94)
      Halvor Mehlum, Karl Moene and Ragnar Torvik

      Unproductive enterprises that feed on productive businesses are rampant in developing countries. These parasitic enterprises take divergent forms. Some enterprises are headed by violent bandits and brutal mafia bosses, others by organized middlemen or smart political insiders.

      Parasitic enterprises can function like bandits. Youth gangs or rebel groups may transform themselves into criminal enterprises that extort private businesses (Collier 2000). Most of the targets are small-scale informal enterprises such as street sellers and sweatshops, but the targets may also be large-scale modern firms. One case in point is the lucrative businesses of kidnapping and extortion in Colombia, where guerrillas collect...

      (pp. 95-115)
      Karla Hoff and Arijit Sen

      Throughout history, poor rural households facing endemic risks and lacking insurance and credit markets have come together in social, ethnic, and occupational groups to provide economic assistance to each other. In many instances, group members are relations by birth, marriage, and/or ethnicity—this is the “extended family system” (kin system, for short). In other cases, group members are households in similar occupations living in close proximity, such as fishermen in small marine villages in India, where membership is more fluid.¹ In this chapter, we focus on the economic effects of the institution of kin system in a modernizing society.


      (pp. 116-138)
      Samuel Bowles

      Hernán Cortés’s long letters to King Charles of Castile describe the exotic and unusual customs he and his armed band encountered as they advanced toward Temixtitan in 1519. But in light of the thirteen millennia or more that had passed since there had been any sustained contact between people of the Old World and the New, what is striking about his account of Mexico is how familiar it all was. Upon reaching Temixtitan (modern day Mexico City), he wrote:

      There are many chiefs, all of whom reside in this city, and the country towns contain peasants who are vassals of...

  7. Part Three Neighborhood Effects

      (pp. 141-175)
      Steven N. Durlauf

      To live in Harlem is to dwell in the very bowels of the city; it is to pass a labyrinthine existence among streets that explode monotonously skyward with the spires and crosses of churches and clutter under foot with garbage and decay. Harlem is a ruin—many of its ordinary aspects (its crimes, its casual violence, its crumbling buildings with littered areaways, ill-smelling halls and vermin infested rooms) are indistinguishable from the distorted images that appear in dreams, and which, like muggers in a lonely hall, quiver in the waking mind with hidden and threatening significance. Yet this is no...

    • Chapter 7 DURABLE INEQUALITY Spatial Dynamics, Social Processes, and the Persistence of Poverty in Chicago Neighborhoods
      (pp. 176-203)
      Robert J. Sampson and Jeffrey D. Morenoff

      Poverty can trap entire nations and social groups, not just individuals. The persistence of poverty among social groupings is perhaps the more intriguing and surprisingly understudied puzzle, especially in the case when it is not necessarily the same individuals that make up the groups over time (see also Tilly 1998). In this chapter we consider urban neighborhoods as one such social grouping and investigate the durable consequences of concentrated poverty.

      To set the context, we begin with a descriptive and deceptively simple question: how much stability and change is there in concentrated neighborhood inequality over time? The question here is...

    • Chapter 8 SPATIAL CONCENTRATION AND SOCIAL STRATIFICATION Does the Clustering of Disadvantage “Beget” Bad Outcomes?
      (pp. 204-230)
      Michael E. Sobel

      During the first half of the twentieth century, it was widely believed that aggregate economic growth was the solution to the problem of poverty. Thus, it is not surprising that interest in this problem waned in the wake of the prosperity and rapid economic growth in America following World War II, and indeed, during this period, the percentage of the population in poverty (Lampman 1971) declined. But poverty did not entirely disappear, and Galbraith (1958), who was influential in bringing the problem back into the public’s vision, identified several forms of poverty resistant to economic growth. First, there are the...

    (pp. 231-232)
  9. INDEX
    (pp. 233-241)