Poverty and Inequality Dynamics and the Role of Social Policies

Dr. Lena Giesbert
2012 - 2017
EC, 7th Framework Programme (FP7)
ESRC/DFID Joint Fund for Poverty Alleviation Research

NOPOOR Consortium (led by Institut de Recherche pour le Développement (IRD, France)

University of Manchester, UK

Brac University Dhaka, Bangladesh

Jawaharlal Nehru University, New Delhi, India

Dr. Kati Schindler, German Institute for Economic Research (DIW), Berlin, Germany

Dr. Susan Steiner, Institute of Development and Agricultural Economics, University of Hannover, Germany



Research Questions

  • How and to what extent do determinants of poverty dynamics differ between countries and regions, and under what circumstances can general mechanisms be identified?
  • What is the relationship between education, employment, and poverty dynamics?
  • How is (chronic) poverty publicly perceived and how do poor people themselves experience poverty?
  • How do risk and strategies applied to deal with these risks relate back to observed poverty dynamics?

Contribution to International Research
Research on diverging welfare trajectories on a micro-level stems from the macroeconomic literature on poverty dynamics. However, regional differences, the consequences of risks, and asset-based poverty traps on the micro-level have not been sufficiently captured empirically. In addition, development research has mainly been concerned with the direct effects of income on poverty. There is a lack of research on how the living standard of people sustainably improves, for instance through employment and education, both of which can be paths to upward mobility as well as factors solidifying existing inequality. The research on public opinions and subjective experience of poverty and its determinants contributes to the international research on the subjective perception of well-being.

Research Design and Methods
Our research is based on both quantitative and qualitative methods. Quantitatively, we use micro-level surveys (household surveys, schooling surveys, etc.). In this area, particular attention is paid to proper identification of causal effects by means of the use of natural experiments. Qualitative methods include life and employment histories, focus group discussions, open-ended interviews, etc.

Preliminary Results
Research on the public perception of poverty confirms a consistent global belief that poverty is persistent. We show that interests, position, knowledge, and shared values relating to social justice are important factors that shape public attitudes to chronic poverty.

Results for rural Mozambique, for example, show no evidence for a poverty trap based on multiple equilibria in the medium term. However, rural households converge to a very low equilibrium and are rather collectively trapped in generalised underdevelopment. Risks (a drought) and household coping strategies help to explain the observed poverty dynamics.

From our research in Ghana we learn that poorer households have less access to formal insurance, savings and credit options. Evidence also suggests that the use of microinsurance and other formal financial services is mutually reinforcing. At the same time, more universal strategies, such as risk sharing within social networks, do not lose their significance in poor households’ efforts to manage with the multitude of risks they are exposed to. The perceived value of microinsurance consists not only of the expected or experienced benefits and costs, but also of quality, emotional and social dimensions.

Our education research in South Africa suggests that the country is caught in an inequality trap partly caused by the combination of skill scarcity and large skill premiums. These features, in turn, can be traced to skill distributions diverging over primary and secondary school, due to large differentials in school quality.

Results on the role of education in Tunisia show strong returns in terms of occupational status. The estimates we obtain are purged from potential ability and other biases and thus reflect the causal effect of education. Education in Tunisia thus appears to foster mobility. However, we also find some evidence suggesting that these returns might be driven more by "credentialism" than by genuine human capital accumulation.