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Unformatted text preview: The Economic Lives of the Poor Abhijit V. Banerjee [Professor of Economics; Director of the Abdul Latif Jameel Poverty Action Lab] and Esther Duflo [Professor of Economics; Director of the Abdul Latif Jameel Poverty Action Lab] Massachusetts Institute of Technology, Cambridge, Massachusetts. In what turned out to be a rhetorical master-move, the 1990 World Development Report from the World Bank defined the extremely poor people of the world as those who are currently living on no more than $1 per day per person, measured at the 1985 purchasing power parity (PPP) exchange rate. In 1993, the poverty line was updated to $1.08 per person per day at the 1993 PPP exchange rate, which is the line we use in this paper. Poverty lines have always existedindeed $1 per day was chosen in part because of its proximity to the poverty lines used by many poor countries. 1 However the $1-a-day poverty line has come to dominate the conversations about poverty to a remarkable extent. But how actually does one live on less than $1 per day? This essay is about the economic lives of the extremely poor: the choices they face, the constraints they grapple with, and the challenges they meet. The available evidence on the economic lives of the extremely poor is incomplete in many important ways. However, a number of recent data sets and a body of new research have added a lot to what we know about their lives, and taken together there is enough to start building an image of the way the extremely poor live their lives. Our discussion of the economic lives of the extremely poor builds on household surveys conducted in 13 countries listed in Table 1: Cote dIvoire, Guatemala, India, Indonesia, Mexico, Nicaragua, Pakistan, Panama, Papua New Guinea, Peru, South Africa, Tanzania, and Timor Leste (East Timor). We mainly use the Living Standard Measurement Surveys (LSMS) conducted by the World Bank and the Family Life Surveys conducted by the Rand Corporation, all of which are publicly available. In addition, we also use two surveys that we conducted in India with our collaborators. The first was carried out in 2002 and 2003 in 100 hamlets of Udaipur District, Rajasthan (Banerjee, Deaton, and Duflo, 2004). Udaipur is one of the poorer districts of India, with a large tribal population and an unusually high level of female illiteracy. (At the time of the 1991 census, only 5 percent of women were literate in rural Udaipur.) Our second survey covered 2,000 households in slums (or informal neighborhoods) of Hyderabad, the capital of the state of Andhra Pradesh and one of the boomtowns of post-liberalization India (Banerjee, Duflo, and Glennerster, 2006). We chose these countries and surveys because they provide detailed information on extremely poor households around the world, from Asia to Africa to Latin America, including information on what they consume, where they work, and how they save and borrow. To flesh out our main themes further, we also draw freely on the existing research literature.themes further, we also draw freely on the existing research literature....
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This note was uploaded on 09/28/2011 for the course ENVS 450 taught by Professor Staff during the Spring '11 term at S.F. State.
- Spring '11