Review of Why Poverty Persists: Poverty Dynamics in Asia and Africa

This book is a product of the Chronic Poverty Research Centre, a large, ten-year programme of multi-disciplinary research and policy analysis, funded by DFID, and designed to understand long-term persistent poverty. In the words of the 2004-5 Chronic Poverty Report, ‘between 300 and 420 million people are trapped in chronic poverty. They experience deprivation over many years, often their entire lives, and commonly pass poverty on to their children’ (CPRC 2005:v).

But are they? And do they? Ironically, one of the main findings of CPRCChronic Poverty Research Centre research is that poverty does not quite work in the way described, with one group trapped in long-term destitution, and everyone else progressing. Instead, there is considerable turnover at the bottom end of the income and asset distribution. Some people do indeed remain trapped. However, others prosper and escape poverty. Some escape and then fall back. Some, who are not poor are driven into poverty. It is to the credit of the CPRCChronic Poverty Research Centre researchers that they allowed this observation of reality to drive their research agenda in new directions, perhaps not foreseen at the outset: that their work is best known for insights on poverty dynamics.

The research agenda set by a focus on poverty dynamics is both substantively and methodologically challenging. The research questions are about the forces which create and maintain poverty, the ladders and escape routes, the shocks and reverses. Individual experience will be as important as that of the community; idiosyncratic risk as important as covariate risk; positive and negative deviance as important as the mean; a longitudinal, historical perspective as necessary as a cross-section snapshot. Methodologically, a combination of quantitative and qualitative methods is implied. It is again to the credit of CPRCChronic Poverty Research Centre that it embraced the complexity of this terrain and plurality of method: life histories and case studies, as well as panel surveys, brought together in some 400 publications, available on the CPRCChronic Poverty Research Centre website (www.chronicpoverty.org).

Bob Baulch and his co-authors represent one strand of methodological plurality, that of economists engaged in carrying out panel surveys over repeated rounds, as many as five in the case of Ethiopia, but more commonly two or three. There are six country cases in the book, dealing respectively with Bangladesh, Ethiopia, Nepal, Pakistan, South Africa and Vietnam; with opening and closing chapters by the editor.

Those interested in the technical difficulty of managing and interpreting panel surveys will find these case studies illuminating. Baulch reviews measurement issues in his Introduction, focusing particularly on attrition rates and measurement error. Attrition rates range from 5.4% in Pakistan to 37.9% in South Africa, and obviously the characteristics of these drop-outs make a big difference to the results. Are they randomly distributed across the survey sample? Are they concentrated among those who have escaped poverty? Or, in what Baulch describes as the ultimate form of chronic poverty, have they died? Migration and new household formation present further complications. The more that can be done to limit attrition the better, despite the expense, but there are also statistical remedies available: two stage selection models; inverse probability weights; use of instrumental variables; multinomial logit models. These are all important adjustments, no doubt, but they do suggest that panel survey results need to be approached with an open mind. Indeed, Baulch himself concludes that ‘many significant factors in the poverty experiences of individuals and households tend to be ‘suppressed’ by the construction of panels, although they are informative in their own right. Qualitative and participatory studies, for example, suggest that extreme poverty often leads to the migration of household members, the dissolution of households, and in the most extreme and heart-rending cases, the death of unsupported individuals.’ (Pg 7).

One might conclude that the answer to the various measurement and modelling problems is to skip straight to qualitative analysis, for example using life histories. However, this would be to under-value the contribution that careful panel data analysis, of the kind found in this book, can contribute.

First, panel data enable the construction of transition matrices, presented in all the chapters here. In Bangladesh, for example, there was a dramatic reduction in poverty among the panel sample, from 62% in 1996 to 13.3% in 2007, but 5% of those who were not poor in 1996 had fallen into poverty by 2007 (Pg 64). In Ethiopia, poverty among the panel almost halved between 1994 and 2004 (from 34.5% to 19.9%), but 16% of those who were not poor in 1994 were poor in 2004 (Pg 74). One word of caution. It is tempting to read aggregate panel statistics as though they are representative of the country, which usually they are not. It would have been useful to have a note on this in the book.

Second, panel data make it possible to investigate both the long-term causes and shorter-term shocks associated with movements in and out of poverty. Since the authors are economists, and since their focus is largely on income and/or consumption, the focus is on endowments of capital of various kinds, and on returns to capital. Unsurprisingly, poverty falls when endowments per capita rise (more land, more animals, more education, fewer dependants) and when returns are higher; and rises when the reverse is true or when repeated shocks (droughts, illness, dowries) erode the asset base. Education is repeatedly identified as a key escape route. It would be interesting to compare and contrast with the literature on returns to education, which is sometimes less positive. It is also notable that more than one shock is required to knock a household down. A pest attack or an illness or a dowry payment may each be manageable on their own, but turn out to be devastating when combined. It is not surprising that the relative importance of different factors varies as between countries: ethnicity is important in Vietnam, for example, but not in Nepal. A table summarising the different country studies would have been a useful addition to the Introduction or Conclusion.

A question here. Would it be interesting in future work to look at personal attributes, for example entrepreneurial abilities? Not all escapes from poverty are tightly tied to capital endowments. In fact, the CPRCChronic Poverty Research Centre model of poverty traps (CPRC 2011) includes a number of factors not usually captured in panel studies, but which could be considered if the right questions can be devised: ‘limited citizenship’, for example, and ‘social discrimination’.

The third contribution of panel studies is to help identify possible policy interventions, which is the topic to which Baulch turns in the Conclusion. He analyses policies which promote escapes from poverty and prevent descents into poverty, an approach familiar, for example, from Amartya Sen’s work on entitlement promotion and entitlement protection.

In the first category, we find measures which enhance demand for and returns to labour, that being the most abundant asset of the poor. Baulch is an enthusiast for work guarantee schemes, for minimum wages, for affirmative action programmes, and for measures to facilitate internal migration. He also argues that ‘by far the most important asset for escaping poverty, is, however, education. As the panel studies . . . confirm, initial levels of education are strongly associated with both escaping from poverty and rising incomes. . . . Furthermore, once completed, education is an asset which cannot be sold or lost during times of crises’. (Pg 259). In the second category, Baulch favours insurance programmes and social protection. These have a direct benefit, but also, if they are predictable and can be trusted, may encourage risk-taking and innovation in seeking escapes from poverty.

These policy prescriptions will have been developed in consultation with other CPRCChronic Poverty Research Centre researchers, and fit within the CPRCChronic Poverty Research Centre framework, which has five key elements of a policy response to chronic poverty: (a) social protection, (b) public services for the hard to reach, (c) building individual and collective assets; (d) anti-discrimination and gender empowerment, and (e) strategic urbanisation and migration (CPRC 2009:12). The tantalising opportunity is to use further rounds of the panel studies to test whether these prescriptions, where implemented, have achieved their objectives.

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CPRC, 2005, The Chronic Poverty Report 2004-5, Chronic Poverty Research Centre, Manchester

CPRC, 2009, The Chronic Poverty Report 2008-9, Chronic Poverty Research Centre, Manchester

CPRC 2011, ‘Tackling Chronic Poverty’, Policy Brief 28, Chronic Poverty Research Centre, Manchester

Note: A version of this review will appear in the Journal of International Development