Poverty traps exist in developing countries where people lack the means to invest in improving their situation or escaping poverty. Foreign aid and government programs aim to help the poor, but some argue this can reduce incentives for self-improvement. Experiments show conditional cash transfers that provide money for health and education can help eradicate poverty long-term by investing in human capital. Improving institutions, education, and addressing corruption are also important for reducing poverty traps.

1. Poverty is a condition where basic
needs for food, clothing and shelter
are not being met.

2. Poverty trap is a spiralling mechanism
which forces people to remain poor. It is so
binding that it does not allow poor people
to escape it. It is normally found in
developing and underdeveloped countries.

3. Jeffery Sachs , an advisor to United Nation
specifies that poor nations are poor
because they are poor. They require some
support in terms of foreign aid.
Some of the economists like William
Easterly and Moyo specify that foreign aid
makes people more lazy.
But both the views lack ground reality and
is largely based on assumptions.

4. There is a poverty trap whenever the
scope for growing income or wealth at a
very fast rate is limited for those who have
too little to invest. This expands
dramatically for those who can invest a bit
more.
On the other hand, if the potential for fast
growing is very high then poverty trap can
be reduced.

5. A single graph cannot solve the problem of
poverty trap. It requires qualitative and
quantitative data to find out not only the
causes of poverty , but also how poor
people think on various policies. This is
why RANDOMIZED CONTROL
TRAILS[RCT], is done.

6. In this randomized control trails, different
programs like how poor people use bed
nets can be compared with different
assumptions. It can also make one clear
about awareness of poor people.

10. Some of the experiments on hunger based
poverty trap specifies that when people
were given wheat and rice at subsidized
rates, they consumed both wheat and rice
in small quantities, and went for meat and
beef additionally. This means people are
spending on highly tastier items ,than
highly nutritional items. There is nutrition
based poverty trap.

11.  The previous slide specified an experiment.
But there is no problem of intake of calories.
But there is a problem of intake of nutrition.
Here the problem mainly lies in use of
micronutrients. Essential micronutrients like
both IODINE and IRON are very important for
not only children but also pregnant ladies. Now
this specifies that there must be change in
food policy based on nutrition rather on
calories.

12.  In South East Asian countries like India or
other countries from Africa, though poor
people are provided with both subsidies and
concessions on food. But for these people
there is something more from food like cell
phone, television, newspaper etc. Have
become more essential that decides the
income spent on food. Even huge spending
on customary practices on many occasions
decide the budget on food.

13. Illiteracy is one of the causes of poverty.
There are lot of questions relating to
education.
Where should education be given?
How should it be given?
What is it’s benefit financially?
These questions have a different views
and answers.

14. The demand wallahs a set of critics believe
that there is no point in supplying
education unless there is a clear demand
for it. When the benefits of education
increase, enrolment will increase. These
critics specify to bring an investment and
business pattern to education and labour
pattern to increase competitiveness and
increase demand for it.

15.  The demand wallahs projection will not work
when state capacity is more limited and
compulsory education cannot be enforced.
Here governments must make it financially
worthwhile for parents to send their children
to school. This brought in a new idea called
CONDITIONAL CASH TRANSFER[CCT].
This was introduced by SANTIAGO LEVY a
former professor of economics at Boston
university.

16. By linking the receipt of welfare payments
to investment in human capital(health and
education) it can be ensured that money
spent on today could eradicate poverty not
only in short term, but also in long term.
This inspired program of PROGRESA.
PROGRESA was the first CCT program. It
offered money to poor families, but only if
children regularly attended schools.

17. To make the program politically acceptable
payments were presented as
compensation to the family for the wages
lost when their child went to school instead
of working.
But in reality, the goal was to nudge the
family, by making it costly for the family to
send their children to school regardless of
what they thought of education

18. For making the project successful
Santiago Levy set up a pilot project in a
randomly chosen group of villages. The
program demonstrated without doubt that it
had substantially increased school
enrolment. The success of CCT spread
like wildfire. It had brought positive
changes in education policy. But it must
have proper administrative wing to run this
policy.

19.  Private schools play an important role in the
process of filling the gaps in education
system. The RIGHT TO EDUCATION which
was called the voucher privatisation where
government gives citizens vouchers to pay
private-school fees. Slowly after new
industrial policy 1991, people started to turn
up to private schools. Students in private
schools are better in literacy than government
school kids.

20.  Stories about great scientist Albert Einstein
and math genius Ramanujam is well known.
 The problem is there is no straightforward
way to identify talent until one is spending a
lot of time doing what the education system is
doing. Education system in developing
countries fail in 2 aspects; sound basic set of
skills and identifying talent. Moreover the job
of getting quality education is getting harder.

21. India’s IT giants Infosys had kept testing
centres where people including those
without much formal education can walk in
and take a test that focuses on intelligent
and analytical skills. This alternative route
is source of hope for those who fell
through gaping holes in the education
system.

22. Corruption is of course a poverty trap
Poverty causes corruption and corruption
causes poverty. One of the suggestions is
to break the trap by focusing on making
people in developing countries less poor.
Aid should be given for specific
goals(malaria control, food production,
safe drinking water, sanitation)that can be
monitored.

23. Good economic institutions will encourage
citizens to invest, accumulate and develop
new technologies as societies will prosper.
Bad economic institutions will have the
opposite effects.
It is the responsibility of the rulers to shape
a responsible political and economic
institutions for people of a nation.

24.  One possible way to break the vicious cycle
of bad institutions is to import change from
outside. If you cannot run your country sub
contract it to someone who can better run it.
 Inspired by great example of Hong Kong,
developed with great success by British and
then handed back to China. This is concept of
Charter cities where an empty strip of territory
is given to foreign power for time period to
develop new cities.

25.  In Indonesia, which had one of the corrupt
institutions, World Bank had given aid to some
villages for building their own infrastructure. But
the money given was wasted on giving extra
wages and bad quality materials was purchased.
Government leaders in charge of this program told
the village leaders that the villages work was
monitored by the auditors and special officials.
From next month, this was controlled. To solve
corruption bigger institution is not required some
strict evaluation with transparency is need of the
day.

26. When the grocery owner is selling
something to us, we are not only paying for
the good, but also for the social value she
is delivering.
Similarly, there is no easy way of
assessing the performance of the most
people who work for government.
The temptation to break rules is ever
present both for bureaucrats and people,
which mainly leads to corruption.

27. The rules framed for the institutions had
three I’s as their problem [Ideology,
Ignorance, Inertia]
Large scale waste and policy failure often
happen not because of any deep structural
problem, but because of lazy thinking at
the stage of policy design.
Good politics may or may not be
necessary for good policies; it is certainly
not sufficient.

28. Careful understanding of the motivations
and constraints of everyone(poor people,
civil servants, taxpayers and so on) can
lead to policies and institutions that are
better designed and less likely to be
perverted by corruption or dereliction of
duty.
These changes will be incremental, but
they will sustain and build on themselves
for a new healthy change