How do you live with less than one dollar a day?

Since the 1990 World Development report from the World Bank, it is common to define the poor as those who live with less than 2 dollars a day, and the extremely poor as those with less than 1 dollar a day. Since then, a lot of studies have computed the evolution of the number of poor people. Almost all these poor and extremely poor people live in developing countries. In a recent paper, Professors A. Banerjee and E. Duflo, from M.I.T., have gathered the most recent surveys, conducted among the poor and the extremely poor in 13 countries/regions of Latin America, Africa and Asia, describing their economic lives.[1] Useless to say, these surveys contain a number of surprises, about how low their well-being is in many dimensions, about their struggle to earn money, about how they spend the money earned, and about the many obstacles to their economic prosperity. We would like to summarize these findings here.

Well-being is multidimensional. Poverty typically comes with deprivation in several dimensions. It was expected that extremely poor people don’t eat sufficiently. Indeed, this is illustrated, for instance, in the Udaipur region, one of India’s poorest regions, where more than 40 percent of the surveyed extremely poor people report not to have enough to eat. What was less expected, though, was the extent of morbidity. This is best illustrated by surveys in Nicaragua, Udaipur, and Mexico, where between 35 and 46 percent of the surveyed poor people reported that one of their household members was bedridden or in need of a doctor. Morbidity has direct consequences on well-being, but also threatens the ability to earn money.

Poor people struggle to produce their existence means and to earn money. Surprisingly many poor people do own cultivated land, even if land ownership varies a lot among countries. Only 4 percent of the poor in Mexico own land, for instance, and the plots are typically very small, whereas up to 85 percent of the poor own cultivated land in Panama, and plots are, on average, two or three hectare large. It is infrequently the case, however, that poor people draw their main source of resources from cultivating their land. Even in rural areas, the majority of poor people declare to draw their main source of income from their work outside agriculture. They often run their own business. These jobs often require poor people to temporarily migrate from the family house: 60 percent of the poorest households report that someone from their family had lived outside for a part of the year to obtain work. While parents work, children go to school. School attendance rates are not very different among the poor from among the richer households, and girls go almost as often to schools as boys.

Surveys also reveal that poor people spend their money in a way that is not very different from the way richer families spend their money. This shows that the poor choose not to spend all their money on food. Moreover, they spend surprisingly much money on entertainment goods: festivals (like weddings, funerals, or religious festivals), or entertainment duration goods (like radios), with, again, large differences among countries (the percentage of radio ownership ranges from 11 percent of poor household in rural Udaipur to more than 70 percent in South Africa and Peru).

The surveys also illustrate the many obstacles to the economic prosperity of the poor. First, the poor don’t have enough options to protect themselves from negative shocks. For instance, they typically don’t have access to good saving technologies (with the notable exception of Cote d’Ivoire, where 79 percent of the extremely poor households under $1 a day have a savings account), even if the development of microfinance and microcredit facilities has improved their access to borrowing technologies. Another example is the lack of access to formal insurance mechanisms, with the notable exception of Mexico, where about half of the extremely poor have coverage. Formal insurance is often replaced with the partial insurance that is offered through solidarity transfers in informal networks. That only guarantees very partial insurance, though, and the situation of the poor remains extremely vulnerable to income variations. Second, infrastructure (sanitation, electricity, etc.) and access to public services (medical services, schools, etc.) are much worse for the poor than for the non-poor, both in quantity and in quality, even if there may be huge differences among countries (for instance, no household in the Udaipur sample had a latrine, whereas all households had one in the Nicaragua sample).

Those surveys are key to help us understand the lives of the poor. This understanding is a crucial step in the research on anti-poverty policies, a research that is also at the heart of recent developments in economics.

[1] A. V. Banerjee and E. Duflo (2007) The economic life of the poor, Journal of Economic Perspectives—Volume 21, Number 1—Pages 141–167

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One Response to How do you live with less than one dollar a day?

  1. Pingback: Different poverty lines in different countries: an explanation | Poverty, Resource Equality and Social Policies

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