What Is a Poverty Trap?

The poverty trap in development economics means that because of the vicious circle in the economy, it is difficult for developing countries to get rid of poverty and backwardness. There are two types of poverty traps: technology traps and population traps.

Poverty trap

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The poverty trap in development economics refers to the vicious circle in the economy.

Once you fall into this "poverty trap", it is not easy to jump out of it.

In the 1950s, three economists revealed the origins of the "poverty trap":

(1) Nurkse proposed the "vicious circle of poverty" in 1953;

(2) Nelson proposed the "low-level equilibrium trap" theory in 1956;

(3) Myrdal proposed the "Circular Cumulative Causality Theory" in 1957.

These theories suggest that developing countries are always caught in a cumulative vicious circle of low income and poverty. In the words of Nax, "A country is poor because it is poor".

Why the "poverty trap" can relatively lock people in poverty, the basic principle is as follows: because you are poor, you will not be able to enjoy a good education, which will cause the degradation of human capital; because you are poor, you will lack physical capital Investment, many opportunities to make money are missed by you; because you are poor, it limits your scope of activities and freedom, and thus marginalizes you from the mainstream society; because you are poor, it may affect your emotion And mental state, thus desolate and waste life.