Paper: Kraay & McKenzie (2014)

JEP paper by two WB economists.
See handwritten notes in OneNote [Research Projects --> Poverty Dynamics --> Paper: Kraay & McKenzie (2014)].
== Summary ==
=== 1. Introduction ===
They mention three countries that had ~constant GDP per capita for several decades, and ask 'why did these not increase?'. One possibly explanation is a poverty trap: a set of self-reinforcing mechanisms whereby countries or households that start poor remain poor. This idea motivates 'big push' policies to instigate a virtuous cycle of higher savings, investment, and growth. Economic theory has long offered a number of different models that can give rise to such traps both at the macro and micro levels.They mention a paper, Nelson (1956), noting that the idea of poverty traps is not new. What does the modern evidence suggest?
Contents: they (2) outline a simple model of a poverty trap at the country level, and (3) examine evidence on the persistence of poverty at the country and HH level to show that stagnant income over long periods are rare in practice. Next, (4) they examine the main macro and micro mechanisms that are hypothesized to give rise to poverty traps, focusing on multiple-equilibria traps used to motivate foreign-aid efforts.A related strand of literature stresses the possibility of self-reinforcing low-quality institutions (e.g. Acemoglu & Robinson, 2012). These do not tend to be used as a justification for aid policy. The main mechanisms discussed include: (4.1) country-level S-shaped savings functions, (4.2) "big-push" theories of development based on coordination failures, (4.3) hunger-based traps, and (4.4) occupational poverty traps combining borrowing constraints with lumpy production technologies. They conclude these types of poverty traps are rare, and discuss (4.5) behavioral poverty traps as a recent area of research, and (4.6) geographical poverty traps as the most likely form of a trap. To conclude, (5) the policy implications of this call for things as promoting migration instead of 'big push' aid or microfinance. 
=== 2. A Simple Model of a Poverty Trap at a Country Level ===
 
 
=== 3. Evidence on the Persistence of Poverty ===
Don't see much evidence for it at the micro nor macro level.
=== 4. Inspecting the Mechanisms ===
==== 4.1. Saving-Based Poverty Traps ====
==== 4.2. Big-Push Models of Poverty Traps ====
==== 4.3. Nutritional Poverty traps ====
==== 4.4. Lumpy Investments Coupled with Borrowing Constraints ====
==== 4.5. Behavioral Poverty Traps ====
==== 4.6. Micro Meets Macro: Geographic Poverty Traps ====
=== 5. Implications for Policy ===