Development Economics Lecture 5: Poverty Alleviation

Many people lack access to essential services, such as electricity, water, and sanitation. This is more common in rural areas compared to cities.

While some access to education and healthcare exists, quality is often low leading to poor health outcomes and limited learning.

Informal insurance systems are common, where people rely on family and friends for help during difficult times. But this is not always enough to protect against all risks.

Land ownership in developing countries is often insecure, making it difficult to borrow money or invest in improving the land. This is a hurdle for economic growth.

Poverty alleviation programs aim to reduce poverty today and in the future, considering the welfare of future generations. These programs face limitations due to budget constraints and political considerations.

Investing in the younger generation is crucial for development. These investments are intertemporal complements, meaning early investments yield greater returns than later ones.

Programs that focus on improving the lives of young people are especially valuable. This not only benefits them but also contributes to long-term economic growth.

Cost-effectiveness analysis is crucial for developing effective programs. It aims to ensure that resources are used wisely to achieve the greatest impact.

A situation where individuals or households are trapped in poverty due to low returns to their investments, making it difficult to escape poverty even with increased effort.

A cycle of poverty where individuals lack access to essential resources like nutritious food, quality education, and healthcare, limiting their ability to improve their economic well-being.

Barriers imposed by regulations that restrict individuals' opportunities to improve their economic situation, such as limitations on migration or access to certain professions.

A situation where individuals lack access to credit, struggle with lumpy investments, or lack self-control, making it difficult to break free from poverty.

Poverty traps resulting from low aspirations, high stress, or mental health issues, hindering individuals' motivation and ability to improve their lives.

A situation where a whole economy suffers from lack of demand, hindering growth and perpetuating poverty.

Programs designed to help individuals and families escape poverty by providing them with financial assistance, access to resources, and support services.

Direct cash transfers provided to individuals or households, often in the form of regular payments, to meet basic needs and improve living standards.

Comparing outcomes in treatment and control villages, where only some households in the treatment village receive the intervention, helps to understand the impact of the intervention on both directly treated and surrounding households.

A situation where people are trapped in poverty due to a combination of factors, such as lack of education, limited access to resources, and poor health.

Analyzing data from randomized controlled trials to understand the effectiveness of poverty alleviation programs. This involves comparing outcomes of treatment and control groups, and accounting for potential confounding factors.

Distributing the treatment randomly ensures that there is no systematic difference between the treatment and control groups, except for the intervention itself. This allows researchers to isolate the impact of the intervention.

A statistical tool to evaluate the effectiveness of a treatment, considering potential confounding factors like baseline outcomes, country, survey version, and stratification.

Using a lottery to allocate treatment to villages can boost trust and acceptance, as it is perceived as a fair system. This can help avoid resistance from people who feel they are being unfairly targeted.

Two-stage randomization involves first randomly selecting villages for the intervention and then randomly selecting households within those villages. This enables the study of spillover effects on both eligible and ineligible households.

The Give Directly program provided cash transfers to households in developing countries, focusing on those with thatched roofs.

The program's impact was measured by examining changes in consumption, assets, revenue, food security, and subjective well-being a year after the transfers.

The study found a significant positive effect on consumption, assets, and revenue, indicating that the program helped improve financial security and living standards.

Despite the positive effects on economic outcomes, the program did not lead to an increase in the consumption of alcohol or tobacco.

The study revealed that the Give Directly program did not lead to changes in labor force participation or occupation, but it did enhance the productivity of existing businesses.

The program did not significantly influence investments in health and education, suggesting that other interventions might be necessary to improve access to these essential services.

The Give Directly program has been deemed as highly effective by Give Well, an organization that evaluates the effectiveness of development programs.

The program's success highlights the potential of unconditional cash transfers in alleviating poverty and improving economic outcomes.

The amount by which a country's economy grows in response to government spending, particularly on programs like cash transfers.

The concern that increased money supply due to cash transfers might lead to higher prices, potentially eroding the benefits of the program.

A large-scale experiment where the treatment group consists of all eligible individuals, allowing for the study of general equilibrium effects.

This type of experiment examines the impact of treating a larger proportion of the population within a specific region, revealing the influence of widespread cash transfers on economic systems.

When cash transfers are widely implemented, they can lead to price increases, particularly in areas with limited access to goods and services. This is because the increased demand might outpace supply.

Goods and services that are not easily traded between regions. These are more susceptible to price rises from cash transfers due to localized demand.

Households that are not directly receiving cash benefits. These households can still feel the positive effects of transfers through increased spending, asset accumulation, and income growth by benefiting from a more economically active community.

The study of how price changes affect different parts of an economy, considering the interactions between various sectors and markets.