Kraay, AartMcKenzie, David2014-04-102014-04-102014-04https://hdl.handle.net/10986/17719This 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.en-USCC BY 3.0 IGOABSOLUTE VALUEAGGREGATE LEVELAGRICULTUREAMOUNT OF CAPITALANNUAL GROWTHANTI-POVERTYAVERAGE GROWTHBANK POLICYCAPITAL ACCUMULATIONCAPITAL INVESTMENTCAPITAL INVESTMENTSCAPITAL MARKETCAPITAL STOCKCASH TRANSFERSCONSUMPTION GROWTHCOORDINATION FAILURECOORDINATION FAILURESCOUNTRY DATACOUNTRY LEVELCREDIT CONSTRAINTSCREDIT MARKETCREDIT MARKETSDEVELOPING COUNTRIESDEVELOPMENT COUNTRIESDEVELOPMENT ECONOMICSDEVELOPMENT POLICYDEVELOPMENT RESEARCHDIMINISHING RETURNSDISADVANTAGED AREASDIVERSIFICATIONDIVERSIFIED PORTFOLIOSECONOMETRICSECONOMIC DEVELOPMENTECONOMIC GROWTHECONOMIC LITERATUREECONOMIC STUDIESECONOMIC THEORYECONOMICSELIGIBILITYEMPIRICAL EVIDENCEEQUILIBRIUMESTIMATION METHODEXTREME POVERTYEXTREMELY POOR HOUSEHOLDSFAMINEFAMINESFARMERSFIXED ASSETFIXED CAPITALFIXED COSTSFOOD INTAKEGDP PER CAPITAGEOGRAPHIC POVERTY TRAPSGLOBAL POVERTYGROWTH MODELGROWTH MODELSGROWTH PERFORMANCEGROWTH PROSPECTSGROWTH RATEGROWTH RATESGROWTH REGRESSIONSHEADCOUNT POVERTYHOLDINGHOUSEHOLD CONSUMPTIONHOUSEHOLD INCOMEINCOMEINCOME DISTRIBUTIONINCOME DYNAMICSINCOME GAINSINCOME GROWTHINCOME LEVELINCOME LEVELSINCREASING RETURNSINCREASING RETURNS TO SCALEINEQUALITYINFORMAL CREDITINSURANCEINTERNATIONAL BANKINVENTORIESINVESTINGINVESTMENT RATEINVESTMENT RATESINVESTMENT TECHNOLOGIESLAND DEGRADATIONLIQUIDITYLOTTERYLOW INCOMEM1M2MACROECONOMICSMALNUTRITIONMARGINAL PRODUCTMARGINAL PRODUCTIVITYMARGINAL RETURNMARGINAL RETURNSMARGINAL UTILITYMARGINAL UTILITY OF CONSUMPTIONMARKET FAILURESMICROENTERPRISESMICROFINANCENPLNUTRITIONPER CAPITA GROWTHPER CAPITA INCOMEPER CAPITA INCOMESPERSISTENT POVERTYPOLICY AREASPOLICY IMPLICATIONSPOLICY INTERVENTIONSPOLICY MAKERSPOLICY PERSPECTIVEPOLICY RESEARCHPOLITICAL ECONOMYPOORPOOR AREASPOOR COUNTRIESPOOR INDIVIDUALSPOOR POPULATIONPOOR RURAL AREASPOVERTY RATESPOVERTY TRAPSPRODUCTION FUNCTIONPRODUCTIVE ASSETSPRODUCTIVE INVESTMENTSPRODUCTIVITYPROPERTY RIGHTSPURCHASING POWERREAL GDPREMOTE RURAL AREASRISING DEMANDRISK MANAGEMENTRURALRURAL REGIONSRURAL ROADSRURAL WOMENSAVING FUNCTIONSAVING RATESAVINGSSMALL BUSINESSSMALL BUSINESSESSTANDARD DEVIATIONSTANDARD OF LIVINGTARGETINGTOTAL FACTOR PRODUCTIVITYTOTAL FACTOR PRODUCTIVITY GROWTHTRANSITION ECONOMIESULTRAPOORUNEMPLOYMENTWAGESWARWATER AVAILABILITYWEALTHWORKERS EXPERIENCEWORKING CAPITAL10.1596/1813-9450-6835