After a month of retreat, I am coming back with a review for this very nice book One Illness Away: Why People Become Poor and How They Escape Poverty. It is a short and neat presentation of a novel method to measure the dynamics of poverty instead of the stock value. Perfect weekend reading.
The main takeaway, as the author has mentioned several times throughout the book, is the following equation:
Poverty = frequent downward tugs + restricted upward mobility.
Quite often we only see the second term in poverty alleviation. Researchers and politicians emphasize empowering people with upward opportunities to lift themselves out of poverty, but the quality of such escapes is rarely examined. The author, through a study spanning decades, discovered that frequent descents into poverty accounts for a great deal of failure in poverty alleviation.
He invented a methodology to measure a households’ change in poverty status called “stages-of-process”. The idea is to classify households into “poor”, “non poor” and “rich” categories based on a set of descriptions elicited from the respondents. Examples are “can afford primary education for children” and “is buying or leasing land”. The author then investigates how households move up or down the ladder in a multi-year period. Several lessons can be drawn from his results:
1. The poor is not a static category. Within a community in a given time period, some people are able to escape poverty, while others fall into it. Micro poverty traps (i.e. discrete positive or negative events at the household level) play a bigger role than macroeconomic environments.
2. One negative event often leads to another, and it is this chain of unfavorable events that results in descent into poverty. When a breadwinner of a family gets ill, the family has limited resources and incomes but has to spend money to cure its main income earner. The lack of insurance and credit aggravates the financial burden of the family. If the income earner dies, the family can be obliged to organize a grand burying ceremony which adds more onto their debts and pushes them further into poverty.
3. There are several reasons how the poor escape from poverty: diversification of income sources, improvement in agricultural productivity, living in a community with better infrastructure (road, health facilities, communication), and so on. However, there are limitations to some of these channels. On the one hand, the poor often have limited agricultural land to gain from diversification of crops (sometimes diversification is not even possible on a tiny plot); on the other, employment in the informal sector generates irregular incomes and lacks security.
4. Education is probably not as important as contacts (of the family) in terms of escaping from poverty. People in remote and underdeveloped communities sometimes are simply unaware of the opportunities they have. The writer then suggests governments in developing countries invest in information — matching the capable but uninformed people with personal development opportunities. This reminds me of Caroline Hoxby’s research (my post here) on how access to school selection information can improve the choices of high school graduates from less developed areas in the United States.
The author, Anirudh Krishna, is an Associate Professor at Duke Sanford School of Public Policy. I hope to meet him some time this semester and discuss about his ideas of refining poverty-related statistics. Thanks to Dr. Lori Leachman for recommending this book.