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A growing literature on poverty traps emphasizes the links between multiple equilibria and risk avoidance. However, multiple equilibria may also foster risk-taking behavior by some pool' people. We illustrate this idea with a simple analytical model in which people with different wealth and ability endowments make investment and risky activity choices ill the presence of known nonconvex asset dynamics. This model underscores a crucial distinction between familiar static concepts of risk aversion and forward-looking dynamic risk responses to nonconvex asset dynamics. Even when unobservable preferences exhibit decreasing absolute risk aversion, observed behavior may suggest that risk aversion actually increases with wealth near perceived dynamic asset thresholds. Although high ability, individuals are not immune from poverty traps, they can leverage their capital endowments more effectively than lower ability types and are there[ore less likely to rake seemingly excessive risks. In general, linkages between behavioral responses and wealth dynamics often seem to run in both directions. Both theoretical and empirical poverty trap research could benefit from making this two-way linkage more explicit. (JEL D81, O12, D90), I. INTRODUCTION A vast literature on poverty traps points to the plausible existence of nonconvexities that generate multiple equilibria. Agents who begin poor may be unable to escape poverty for [...]

To purchase or authenticate to the full-text of this article, please visit this link: http://dx.doi.org/10.1111/j.1468-0335.2006.00538.x Byline: ANDREW G. MUDE ([dagger]), CHRISTOPHER B. BARRETT ([dagger]), JOHN G. McPEAK ([double dagger]), CHERYL R. DOSS ([dagger][dagger]) Abstract: We present a simple two-period, dual-economy model in which migration options may affect the informal financing of educational investments. When credit contracts are universally available and perfectly enforceable, spatially varied returns to human capital have no effect on educational investment patterns. But when financial markets are incomplete and informal mechanisms with imperfect contract enforcement must fill the breach, attributes that affect the returns to education will affect educational lending and, consequently, educational attainment. Migration options can increase the returns to education, but can also choke off the informal finance on which poorer rural households may depend for long-term, lumpy investments like children's education. Author Affiliation: ([dagger])Cornell University ([double dagger])Syracuse University ([dagger][dagger])Yale University Article History: Final version received 12 January 2006.

Temporal climate risk weighs heavily on many of the world's poor. Model-based climate forecasts could benefit such populations, provided recipients use forecast information to update climate expectations. We test whether pastoralists in southern Ethiopia and northern Kenya update their expectations in response to forecast information. The minority of herders who received these climate forecasts updated their expectations for below normal rainfall, but not for above normal rainfall. This revealed preoccupation with downside risk highlights the potential value of better climate forecasts in averting drought-related losses, but realizing any welfare gains requires that recipients strategically react to these updated expectations. JEL classification--D84, O12, O13, Q16 Key words--information, risk, early warning systems, Africa, Kenya, Ethiopia

Causes for continuous poverty in rural areas of Kenya and Madagascar have been analyzed based on poverty trap hypothesis. The study used quantitative and qualitative evidence.

An asset-based approach to poverty analysis is presented. It also deliberates the possibility of identifying strategies for empirical evaluation of poverty traps, long-term poverty and extension of Foster-Greer-Thorbecke class of poverty measures. Asset-based approach can be used in the poverty reduction strategies.

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.worlddev.2005.06.008 Byline: Christopher B. Barrett Keywords: poverty traps; thresholds; Africa; chronic poverty; economic growth; Millennium Development Goals Abstract: This paper offers an informal theory of a special sort of poverty trap, one in which multiple dynamic equilibria exist simultaneously at multiple (micro, meso and/or macro) scales of analysis and are self-reinforcing through feedback effects. Small adjustments at any one of these levels are unlikely to move the system away from its dominant, stable dynamic equilibrium. Governments, markets and communities are simultaneously weak in places characterized by fractal poverty traps. No unit operates at a high-level equilibrium in such a system. All seem simultaneously trapped in low-level equilibria. The fractal poverty traps formulation suggests four interrelated strategic emphases for poverty reduction strategies. Author Affiliation: Cornell University, Ithaca, NY, USA Article History: Accepted 8 June 2005

Limited empirical evidence exists either to refute or confirm the pervasive belief that food aid has significant disincentive effects on recipient food production. Using household-level data from rural Ethiopia, we demonstrate that while simple descriptive statistics appear consistent with the disincentive effects hypothesis, once one controls properly for the endogeneity of food aid receipt, no empirical support remains for the hypothesis that food aid creates disincentive effects among recipient households. The macro economic evidence yields similar findings. Applying vector autoregression methods to national-level data, controlling for possible confounding variables, we find that food aid has no disincentive effect on food production. Key words--targeting, agricultural productivity, placement effects, emergency assistance, Ethiopia

This paper introduces a special issue featuring a set of papers on institutional arrangements for reconciling rural poverty reduction with renewable natural resources conservation in the low-income tropics. Collectively, these papers make four core points. First, synergies do not naturally emerge just because rural poverty reduction and renewable natural resources conservation are each appealing goals with common drivers and some intrinsic interlinkage. Second, it matters less which rules a community or country adopts than how well they monitor and enforce the rules they set. Third, flexibility and adaptability in design are critical to establishing cooperative partnerships that can advance both conservation and development goals. Fourth, multiscalar approaches are commonly desirable. Key words--sustainability, environment, community-based natural resources management, multiscalar approaches

Climatic variability exerts tremendous influence on the livelihoods and well-being of pastoralists in the Horn of Africa. Recent advances in climate forecasting technologies have raised the intriguing prospect of reasonably accurate forecasts of coming seasons' rainfall patterns. We explore the value of such external climate forecast information to pastoralists in southern Ethiopia and northern Kenya using data collected using both open-ended, qualitative methods to identify and understand indigenous climate forecasting methods and quantitative data collected using survey instruments. On balance, climate forecast information does not seem a limiting factor at present in pastoralist communities in the Horn of Africa. Key words--early warning systems, livestock, risk, uncertainty, weather

Effective targeting of transfers is a key issue in public policy to combat poverty. Much faith is presently placed in self-targeting mechanisms such as public employment schemes supported by food-for-work transfers. Where targeting errors have been observed, these are usually attributed to mismanagement of key operational details, such as the project 's wage rate. Using a unique data set from rural Ethiopia, we demonstrate that targeting errors may also have structural causes in some low-income countries. We hypothesise that imperfect factor markets generate a predictable dispersion across households in reservation wage rates that breaks down the unconditionally positive relation between income and shadow wages on which the theory of self-targeting public employment programmes rests. Our results confirm that the inaccuracy of FFW targeting stems from the fact that, in rural Ethiopia, higher income households are endowed with more labour per unit of land or animal. Due to poor factor markets in land and livest ock these labour-abundant households have lower marginal labour productivity on farm, thereby depressing the reservation wage rates they find acceptable for FFW participation., INTRODUCTION The problem of targeting transfers is a key issue among scholars and development professionals concerned about poverty, food insecurity, and vulnerability. Given a fixed amount of resources available to [...]