One-time boost can release poor from poverty trap - Bangladesh...

An earlier published paper, by some of this paper’s LSEbased co-authors, quantifies the experiment’s material gains. After four years, for women given a cow in 2007, earnings increased by 37 percent, consumption rose 10 percent, ownership of household durables increased 110 percent, and extreme poverty (those living on under $1.25 per day) declined 15 percent, compared to the control group.

In short, this intervention works. But why? The current paper closely scrutinizes the BRAC data to arrive at an explanation. The villages in the BRAC experiment have a “bimodal” wealth distribution: Some people have very few assets, while others have significantly more, with a gap in between the two levels. As it happens, when people in the poorest group receive a $500 asset, it leaves them in the gap between those levels.

The poor do not stay in that gap, however, after receiving that $500 asset. Tracking households over time, the researchers identified a striking pattern. The gap in between wealth levels is actually a threshold. People whose acquisition of the $500 allowed them to surpass that threshold gained income and wealth over time, while those below it remained poor.

Essentially, acquiring even one cow allowed members of very poor households to move from being underemployed laborers to working more with livestock and in land cultivation.

It’s not that the poor did not want to work; hours worked actually rose when people had more work options. The study estimates that 98 percent of poor households consisted of wage laborers before the intervention, whereas about 98 percent would choose to devote some hours to livestock rearing, given enough assets.

“The poor are trapped in these occupations as a result of the fact that they are born poor,” Balboni says.

A growing interest in big pushes

The findings about the BRAC program in Bangladesh fit a burgeoning literature that has examined “big push” programs and their implications.

And while Balboni focuses much of her research on environmental economics, other MIT scholars have also analyzed this subject.

In a paper published in late 2021, MIT economists Abhijit Banerjee and Esther Duflo, with doctoral student Garima Sharma, found that a similar BRAC program in rural India generated generated income increases of 30 percent while producing economic benefits at least four times the cost of the program (and possibly much more). Banerjee and Duflo have also examined evidence across the field on poverty trap dynamics.

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