Poverty trap

A poverty trap (sometimes known as a poverty cycle or a cycle of poverty) is a set of hypothesized self-reinforcement mechanisms that cause poor countries to remain poor, such that present poverty directly causes future poverty. A commonly postulated mechanism is that, when resources can at most only meet the basic needs of the population, the lack of resources available for investment will constrain economic development, perpetuating poverty.[1]

A poverty trap (sometimes known as a poverty cycle or a cycle of poverty) is a set of hypothesized self-reinforcement mechanisms that cause poor countries to remain poor, such that present poverty directly causes future poverty. A commonly postulated mechanism is that, when resources can at most only meet the basic needs of the population, the lack of resources available for investment will constrain economic development, perpetuating poverty.[1]

Further reading

Kraay, Aart & David McKenzie (2014) Do poverty traps exist? Assessing the evidence, Journal of Economic Perspectives, vol. 28, pp. 127–148.

Related entries

economic growth | foreign aid skepticism | global health and development fund | global poverty

  1. ^

    Hashimzade, Nigar, Gareth Myles & John Black (eds.) (2017) A Dictionary of Economics, 5th ed., New York: Oxford University Press.

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