Example Of A Poverty Trap

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A poverty trap is essentially a scenario in a number of countries in which a cyclical trap exists that keeps the poorest individuals in the country poor due to a "set of self-reinforcing mechanisms". In other words, the poorest individuals in these countries remain poor despite rising GDP and a rising wealth gap, and per-capita income remains stagnant for years. This is a serious issue because, for example, per capita income in a country that was $1500 50 years ago is still $1500 today. Individuals that are in the poorest percentage of the population then accordingly suffer from a number of issues including malnutrition, less education, and poor living conditions. The irony of this situation is that I would predict that the richest continue …show more content…
The first model shows the situation a country is in when it is in a poverty trap. K* is the capital per capita level that isn 't sufficient enough achieve the desired level of investment. Therefore, the country cannot pass the threshold of z where savings rates are high enough to get to high steady state K**, and the country is trapped. However, a country not in a poverty trap (figure two) accumulates the threshold level of capital z, and advancements in saving, development, etc. are effective. To go back to my point in the previous paragraph, these models indicate that not much is necessary in order to get a country out of a poverty …show more content…
First, their life expectancy remained stagnant (around 33%) for roughly 100 years until around 1900, while their income per person increased from $1500 to around $7000. Between the years 1900 and 2005, their life expectancy shot up around 43% to roughly 76%, but their income per person remained stagnant for the most part. Argentina has done pretty well in comparison to the rest of the world in respect to their income per person, landing at what appears to be a little over the average in 2015. Their life expectancy has also done quite well, also landing at what appears to be above average in 2015. Argentina has done quite well in relation to the United States life expectancy wise, landing only a few percentage points under the United States’ level in 2015. However, Argentina would need to increase their income per person by a staggering ~$25,000 if they wanted to compete with the US level (which would be over double their current income per person).
One policy is that the overall quality of employment needs to be improved, which would increase per capita earnings. Second, the poor in Latin America need better access to basic services, and third they need more effective and inclusive

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