Do Poverty Traps Exist?

This paper reviews the empirical
evidence on the existence of poverty traps, understood as
self-reinforcing mechanisms through which poor individuals
or countries remain poor. Poverty traps have captured the
interest of many development policy makers, because poverty
traps provide a theoretically coherent explanation for
persistent poverty. They also suggest that temporary policy
interventions may have long-term effects on poverty.
However, a review of the reduced-form empirical evidence
suggests that truly stagnant incomes of the sort predicted
by standard models of poverty traps are in fact quite rare.
Moreover, the empirical evidence regarding several canonical
mechanisms underlying models of poverty traps is mixed.