The Economic Lives Of The Poor Summary

Banerjee and Duflo’s article The Economic Lives of the Poor, studies five main areas of the living conditions of the extremely poor: food and its alternatives in spending, savings, work and specializations, infrastructure and health services, and education. In their study they found the percentage of income families spend on food, stays relatively the same even if their income goes up (Banerjee and Duflo, 2009). Families save very little money for lack of somewhere safe to store it, and when they take a loan, it is from their friends and family and not from banks (Banerjee and Duflo, 2009). Workers in developing countries lack specializations since it can be too risky to put all their time and resources into one industry (Banerjee and Duflo, …show more content…
From these studies, Banerjee and Duflo discovered that by looking at the percentage they are spending on food and other goods, stays relatively the same, whether they are extremely poor or poor, living on less than $1.08 or $2.16 per day. Taking this to mean that the extremely poor are focused on increasing their spending as a whole and not specifically spending on food (Banerjee and Duflo, 2009). The authors found that the extremely poor tend to save very little of their money, since it can be unsafe to store it in their homes and at risk of depreciating from inflation. By studying how people use banks, they found most people take out informal loans rather than more expensive loans through a bank (Banerjee and Duflo, 2009). Workers lack specializations in certain fields since they think it is a waste of time or too risky to invest all their time and money into one industry (Banerjee and Duflo, 2009). They found this information by interviewing women in India, by talking to them about how they hold multiple occupations and why they do not focus on one field (Banerjee and Duflo, 2009). From this they learned that factors such as owning small amounts of land and very small business may be an inhibitor to their growth (Banerjee and Duflo, 2009). Businesses function inefficiently, they cannot benefit with economies of scale, they run multiple similar small businesses instead of running different larger business (Banerjee and Duflo, 2009). By looking at the amenities available in each country they found that even though the problems each country faced tended to be different, they all seemed to be battling low quality facilities, sickness, and many absences (Banerjee and Duflo, 2009). These issues seem to be similar in both the health and education systems. By looking at professional’s absences, children’s malnourishment in classrooms, and