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The institutions of poverty

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  • Schmidt, Oliver

Abstract

Institutions shape the incentives and opportunities people find and create. The institutions of poverty discourage accumulations of assets, disable accountability of governance, and dilute potential. After an empirical overview of past and present prevalence of poverty and its scholarly explanations, the macro-economic conditions of poverty are outlined. At the core of the chapter is the discussion of four institutions of poverty within economies; those are lack of assets, lack of accountability, lack of income predictability, and unfavorable spatial distribution. Analyzing the four institutions concurrently will explain poverty within any one country, either low- or high-income, and will allow establishing the level and persistence of poverty in any given country. Their relative weight as determinants of poverty persistence is situation-specific, i. e. differs from region to region, country to country, and social set-up to social-set-up. Selected case-studies – of worldwide microfinance, of Germany's labor market reform, of India's Rural Employment Guarantee act – illustrate the heuristic framework that this chapter proposes to students and policy makers concerned of poverty.

Suggested Citation

  • Schmidt, Oliver, 2008. "The institutions of poverty," MPRA Paper 24411, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:24411
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    File URL: https://mpra.ub.uni-muenchen.de/24411/1/MPRA_paper_24411.pdf
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    References listed on IDEAS

    as
    1. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, June.
    2. Jeffrey A. Frankel, 1997. "Regional Trading Blocs in the World Economic System," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 72.
    3. S. Mahendra Dev, 2008. "India," Chapters,in: Handbook on the South Asian Economies, chapter 1 Edward Elgar Publishing.
    4. Banerjee, Abhijit Vinayak & Benabou, Roland & Mookherjee, Dilip (ed.), 2006. "Understanding Poverty," OUP Catalogue, Oxford University Press, number 9780195305203.
    5. T. Kämpke & R. Pestel & F.J. Radermacher, 2003. "A Computational Concept for Normative Equity," European Journal of Law and Economics, Springer, vol. 15(2), pages 129-163, March.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Institutional Economics; Poverty; Assets; Accountability; Governance; Income volatility; Spatial Economics;

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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