Poverty traps and their implication for the USAID Global Livestock CRSP

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• Poverty traps and their implication for the USAID
  Global Livestock CRSP
• Chris Barrett
• Cornell University

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Different Perspectives on Poverty

• The traditional, static, cross-sectional view
• Headcount and poverty gap (FGT) measures
• in US 33 million below poverty line (11.7)
• in Kenya, its 44.1 and in Madagascar, 69.6
• The emerging, dynamic view
• Persistence measures
• in US only 1/3 of poor remain poor for the whole
  year. Median poverty spell in US is only 4.5
  months despite high poverty line (18,104 for
  family of 4)
• Vulnerability measures
• Estimated risk of falling below poverty line in
  future

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Poverty traps The dynamic view

• Poverty traps Poverty spells that persist for
  long periods
• - Foster hopelessness and insecurity
• - Reproduce poverty intergenerationally (through
  child labor, education and undernutrition)
• - Discourages investment
• Cant get ahead for falling behind
• (Barrett and Carter, Choices 2001-2)

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Poverty traps A descriptive example

• Among the Poor in South Africa in 1998
• (Carter May, World Development 2001)
• 18 chronically poor, o/w 92 in poverty trap
• 25 fell behind, 1993-98, o/w 85 fell into trap
• most of them suffered significant asset loss
• Implication 38 of population and 88 of
  those below poverty line are structurally poor

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Transition probabilities inCôte dIvoire, 1993-95
The probability of being poor next year depends
heavily on whether one is poor this year. Income
mobility can be significant in the middle and
upper ranges of the income distribution, but not
much at the bottom.
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Poverty traps and livelihood strategies in Rwanda
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Assets and poverty traps An Ethiopian
pastoralist example
Among Ethiopian Boran, 17-year herd dynamics data
suggest a poverty trap below 9-10 head/household
with a high equilibrium of 35-55
head/household (Lybbert et al. 2001)
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Relief traps

• Poverty traps also give rise to relief traps for
  donors, who are trapped in humanitarian
  asssistance

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while agricultural research funding declines
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Attacking poverty traps is the right strategy,
inethical, economic and environmental terms

• Poverty reduction
• - 70 of worlds poor live in rural areas, most
  in ASAL.
• Ag growth rapidly reduced global hunger, 1965-85,
  and accounts for 80 of poverty reduction in
  India since 1995.
• Less favored areas offer good return
• Research by IFPRI finds that highest rates of
  return on public investment are in less favored
  lands
• Poverty-environment interrelationship
• - The poor cant afford to conserve resources the
  rest of the world values deforestation and
  habitat loss due to extensification fuelwood
  erosion and soil nutrient mining chemical
  poisoning

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The causality of poverty traps and thematic
implications for the GL CRSP

• Longitudinal, household-level data enables new,
  careful study of poverty dynamics and related
  best bets on how to deal with
• Four key sources of poverty traps
• Risk exposure and limited risk management
• Meager stocks of productive assets
• Rudimentary production/processing technologies
• Weak markets and nonmarket institutions

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Risk exposure and limited risk management
To facilitate exit from poverty traps, must learn
how best to

• 1) Reduce exposure to (asset, health,
  production and price) risk
• 2) Improve tools for managing risk
• -ex ante through diversification
  opportunities, information systems, preventive
  health care and mobility
• -ex post through formal and informal financial
  systems, curative health care systems and safety
  nets

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Meager stocks of productive assets
To facilitate exit from poverty traps, must learn
how best to
1) Build up stocks of natural capital (land,
livestock, soil quality) via stock raising
projects, nutrient recycling, etc. 2)
Build up human capital through improved
child nutrition and education 3) Provide
physical capital through micro-equity
finance, infrastructure, etc.
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Rudimentary technologies
To facilitate exit from poverty traps, must learn
how best to

• Improve productivity of existing asset stock
  (improved genetics, disease management,
  integrated crop-livestock systems)
• Identify and promote effective transition
  technologies
• Finance to facilitate adoption of available
  technologies (case of SRI in Madagascar)

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Weak markets and nonmarket institutions
To facilitate exit from poverty traps, must learn
how best to

• Reduce fixed costs of market access
• Reduce costs of and barriers to intermarket
  transport and storage
• Implement competition policy in rural areas
• Identify and support tenurial institutions that
  safeguard access to key natural resources
• Foster group-based marketing, finance and
  innovation effectively

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Population implications for the GL CRSP

• In order to address poverty traps effectively
  need to emphasize
• chronically poor populations (e.g., pastoralists,
  forest dwellers)
• East and Southern Africa Central Asia (USAID
  Afghanistan strategy) Central America
• In short, poorer livestock-dependent communities
  that suffer high rates of chronic vulnerability
  and that might otherwise miss out on the emerging
  livestock revolution

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Through continued innovation and excellence in
research that responds to pressing global needs,
the GL CRSP can play a valuable role in
addressing poverty traps around the world.