L3 - Development Economics - Panth´on Sorbonne University e

Lecture 2: What is poverty?
Marie-Anne Valfort marie-anne.valfort@univ-paris1.fr

Semester 1, Academic year 2011-2012

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Introduction

According to the World Bank, “poverty is pronounced deprivation in well-being” (World Bank Institute,“Introduction to poverty analysis”, (2005)). Given that we mainly proxy well-being by income (see Lecture 1), we therefore define poverty as a pronounced deprivation in income.

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Introduction

The purpose of the class today is to understand in greater details what poverty means, both from a theoretical and from an empirical perspective, and why we must care about it. The outline of the class is as follows:
1. Measuring poverty 2. What does “being poor” mean on an everyday basis? 3. Why must we care?

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1. Measuring poverty

It takes time, energy and money to measure poverty at the country level, since it can only be done properly by gathering survey data directly from households. Why, then, do we need to go to the trouble of measuring poverty? Three good reasons come to mind.

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1. Measuring poverty

First, this allows to make the poor statistically visible: the measurement of poverty is thus necessary for it to appear on the political and economic agenda (motivation I). Second, it allows to target interventions: one cannot help the poor without at least knowing where (and also who) they are (motivation II). Third, it allows to evaluate policies and programs designed to help the poor: policies that look good on paper may, in practice, not work as well as expected. Measures of poverty are here to identify which poverty-reduction strategies work and which ones do not work (motivation III).

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3. Econometrica (1976)). three axioms must be satisfied by any good measure of poverty: 1. 2. The first axiom is the focus axiom: the measure should not vary if the income of the non-poor varies. 6 / 57 . The third axiom is the transfer (or “Pigou-Dalton”) axiom: inequality-reducing transfers among the poor should reduce poverty.1.1. Measuring poverty 1. Three axioms to be satisfied ◮ According to Sen (“Poverty: an ordinal approach to measurement”. The second axiom is the monotonicity axiom: any income gain for the poor should reduce poverty.

◮ 7 / 57 .1.1. Measuring poverty. 1. Three axioms to be satisfied ◮ Making sure that axiom 1 is satisfied can be enough for anyone who wants a measure of poverty aiming only to make the poor visible (motivation I) and to know where they are (motivation II). However. making sure that axioms 1 to 3 are satisfied is necessary for anyone who wants a measure of poverty aiming to know whether a specific poverty-reduction strategy was successful or not (motivation III).

2 measures the sensitivity of the FGT index to axioms 1. 1.2. p ◮ ◮ ◮ α = 0. 8 / 57 . Greer and Thorbecke (FGT henceforth) designed in 1984 a family of measures which may be generally written as: Pα = where: ◮ 1 N N ∑ i =1. Measuring poverty 1.1. 2 and 3 N is the number of individuals/households in the population p is the poverty line yi is the income of individual/household i. The FGT class of poverty measures ◮ Foster.yi <p ( p − yi α ) .

the FGT poverty measure when α = 2. In the following. P0 . we present the 3 most popular measures of poverty: 1. plus some other indispensable purchases (such as housing). the FGT poverty measure when α = 0 2. P1 . P2 . the FGT poverty measure when α = 1 3. Measuring poverty 1.1. ◮ 9 / 57 . The FGT class of poverty measures ◮ The poverty line p usually captures the budget needed to buy a certain amount of calories.2.

yi <p ( p − yi 0 1 ) = p N N ∑ I ( yi i =1 < p ). then I (yi < p ) is equal to 1 and the individual/household would be counted as poor. where I (. 10 / 57 . if the income of individual/household i given by yi is less than the poverty line p.1. Measuring poverty 1. ◮ In other words. and 0 otherwise.2. The FGT class of poverty measures ◮ P0 is given by: P0 = 1 N N ∑ i =1.) is an indicator function that takes the value of 1 if the bracketed expression is true.

◮ P0 is also called the headcount index which measures the proportion of the population that is counted as poor.1. The FGT class of poverty measures ◮ More precisely.2. Which axioms does P0 satisfy? ◮ 11 / 57 . N where NP stands for the number of individuals living under the poverty line. Measuring poverty 1. we have that P0 = NP .

In other words.2. ◮ ◮ 12 / 57 . it is an adequate measure for anyone willing to make poverty visible and to know where the poor are (motivation I and II) –this explains why it is a very popular measure in studies aiming only to draw the map of poverty worldwide. P0 satisfies only one axiom in a systematic manner. which is the focus axiom. Measuring poverty 1. However. it is definitely not a sufficiently rich measure for anyone willing to carefully evaluate poverty-reduction policies (since axiom 2 and axiom 3 are not satisfied).1. The FGT class of poverty measures ◮ Clearly.

Measuring poverty 1. Information on consumption and income is obtained through household surveys that ask households about their spending habits.2.1. ◮ ◮ 13 / 57 . and expressed in a common unit across countries. the so-called “poverty line”. the same reference poverty line has to be used. a person is considered as poor if his or her consumption or income level falls below some minimum level necessary to meet basic needs (notably avoiding starvation). When estimating poverty worldwide. The FGT class of poverty measures ◮ According to P0 .

Datt and van de Walle (1991) compiled data on national poverty lines across 33 countries and proposed a poverty line of 1$ per day at 1985 Purchasing Power Parity (PPP) as being typical of low-income countries. Measuring poverty 1.25$ to capture the “extremely poor” and 2$ per day to capture the “merely poor” (2005 Purchasing Power Parity). the World Bank’s researchers have updated these estimates in the light of new and often better data. World Bank now uses reference lines set at 1. The FGT class of poverty measures ◮ Ravallion. ◮ ◮ 14 / 57 .1.2. Since then.

1. Measuring poverty 1. about three billion. ◮ 15 / 57 .2. half the world’s population. The FGT class of poverty measures ◮ Chen and Ravallion (2007) estimate that a billion people live on less than 1$ a day (they are mainly concentrated in South Asia and in sub-Saharan Africa). Moreover. gets by on a daily income of less than 2$ a day.

what does the map of poverty worldwide look like (percentage of the population living on less than 1. The FGT class of poverty measures.2.25$ a day PPP over the 2005-2008 period. Measuring poverty 1.1. ◮ More precisely. Source: World Bank): 16 / 57 .

2. p ◮ P1 adds up the extent to which individuals fall below the poverty line. The FGT class of poverty measures ◮ P1 is given by: P1 = 1 N N ∑ i =1.yi <p ( p − yi ). Measuring poverty 1.1. 17 / 57 . and expresses it as a percentage of the poverty line p and of the total population N.

and the annual income profile of the population. The FGT class of poverty measures ◮ P1 is a function of the shaded area between poverty line PV. Measuring poverty 1.2.1. 18 / 57 .

P1 stands for the cost of eliminating poverty.2. because it shows how much each individual in the population should contribute (as a fraction of the poverty line) in order to make the incomes of the poor equal to the poverty line.1. The FGT class of poverty measures ◮ More specifically. This explains why P1 is also referred to as the poverty gap index. Which axioms does P1 satisfy? ◮ ◮ 19 / 57 . Measuring poverty 1.

◮ ◮ It might be the case that some groups have a high poverty incidence but low poverty gap (when many of their members are just below the poverty line).2. .1. ◮ It is however not a completely satisfactory measure of poverty for anyone willing to estimate carefully the impact of poverty-reduction policies. P1 satisfies axiom 1 and axiom 2. Indeed... but P1 doesn’t satisfy axiom 3. 20 / 57 ... The FGT class of poverty measures ◮ ◮ Clearly. Measuring poverty 1. It is a nice complementary measure of poverty to the headcount index for those who want to identify to what extent the poor are poor.while other groups have a low poverty incidence but a high poverty gap (when relatively few members are below the poverty line but with extremely low levels of consumption).

2.yi <p ( p − yi 2 ) . Which axioms does P2 satisfy (see the exercise below for a clear answer)? ◮ ◮ 21 / 57 . Measuring poverty 1. The FGT class of poverty measures ◮ P2 is given by: P2 = 1 N N ∑ i =1. P2 is also called the squared poverty gap index.1. p ◮ P2 stands for a weighted sum of squared poverty gaps such that more weight is put on incomes that fall well below the poverty line (this is a major difference with P1 where all incomes are weighted equally).

3. Practice now! ◮ Here is an exercise out of 5 pts taken from one of the previous final exams. Please answer the 3 following questions. 1990). World Development Report. If income is transferred from a poor person to someone who is poorer. neither measure changes” (Source: “Poverty”. Measuring poverty 1. 22 / 57 ◮ ◮ ◮ . “The poverty gap and the headcount index are insensitive to the extent of inequality among the poor. (1 pt) Answer: see the definitions of P0 and of P1 above.1. Give an intuitive interpretation for each of these two formal definitions. Question 1: Give the formal definition of the headcount index and the formal definition of the poverty gap index.

◮ 23 / 57 . (2 pts) Answer: see the solution given in class.e: yj + δ < p). Measuring poverty 1.3. Assume that a strictly positive amount of income. denoted δ (δ > 0). Let δ be such that individual j remains under the poverty line after this regressive transfer (i. Practice now! ◮ Question 2: Assume that i and j are two individuals whose incomes. Write a formal proof showing that the headcount index and that the poverty gap index actually do not change when such a regressive transfer occurs between individual i and individual j. denoted by yi and yj respectively. is transferred from individual i to individual j.1. are below the poverty line p and such that yi < yj .

Practice now! ◮ Question 3: Give the formal definition of a poverty index which increases when the regressive transfer described in 2. occurs between individual i and individual j and explain why it is so. Measuring poverty 1.3. (2 pts) Answer: see the solution given in class.1. ◮ 24 / 57 .

3.1. Measuring poverty 1. Practice now! ◮ Using measures of poverty that satisfy the 3 axioms are critical to be able to estimate whether a poverty-reduction policy has been successful or not (see the excerpt from the 1990 WDR below on the next slide). 25 / 57 .

1. Measuring poverty 1. Practice now! 26 / 57 .3.

The staff from the OPHI (Oxford Poverty & Human Development Initiative). What does “being poor” mean on an everyday basis? ◮ How do people survive on so little as 1$ a day? The answer is brutally simple: not well.2. spoke with poor people in various developing countries to better understand how people experience poverty across the world. Here are some insights from the regions of the world the most badly hit by poverty: East Asia & Pacific. ◮ ◮ 27 / 57 . South Asia and Sub-Saharan Africa. an organization which released in 2010 a Multidimensional Poverty Index.

Indonesia 28 / 57 .2. What does “being poor” mean on an everyday basis? Jiyem. 70.

her son. Jiyem grew up in the same village. about four hours per day. “This. “is illbeing. her daughter in law.” says Jiyem.2 USD per day) Although she can joke about her life. “I cannot picture what well-being means. What does “being poor” mean on an everyday basis? ◮ Jiyem shares her home with her blind husband (who is unable to work). working in the fields. and their three-year-old grandson. and troubling.” ◮ ◮ ◮ 29 / 57 .8 USD to 4. the situation is precarious. or in a sugarcane field. No one in their family has ever completed primary school.” she said. who is malnourished.2. He earns around 85 USD to 127 USD per month (2. Her son works in the rice field. pointing to her present surrounds. Jiyem does not earn any money. nor does she have savings.

What does “being poor” mean on an everyday basis? Rabiya. 35. India 30 / 57 .2.

“I want nothing for myself. She owns no land. She regrets not being able to study herself or educate her children. she is paid INR 25 (USD 2. What does “being poor” mean on an everyday basis? ◮ Rabiya is a wage labourer.8) a day. She is a widow and lives with her two unemployed teenage sons. She wants her children to be able to lead dignified lives. just that my children should be happy. She would like them to be free from daily worrying about what to feed their families and to have a house to call their own. During the agricultural season.2.” 31 / 57 ◮ ◮ ◮ . with toilets and access to clean drinking water. She earns a living by working the fields of farmers in hers’ and neighbouring villages. Such work lasts no more than two months a year and does not guarantee daily employment.

Kenya 32 / 57 . 30.2. What does “being poor” mean on an everyday basis? Dalma.

the family sometimes has to go without meals. 33 / 57 . after leaving their village in central Kenya in search of a better life. In the meantime she hopes to find well wishers who will fund her girls to attend secondary school. On top of this.87). She tries to earn a little from other households by delivering water for them. The overall household income is inadequate to support the family’s needs: ◮ ◮ One of the daughters should already be enrolled in preschool but the parents cannot afford the registration fee (USD 9. Her husband can only work when there are jobs available in the surrounding industry park. Dalma says she feels hopeful when there is no sickness in the home. ◮ Dalma hopes that in the future her family will be able to renovate their current old-iron sheeted house and enlarge it.2. her husband and their 7 children live in Lunga Lunga slum (close to Mombasa). What does “being poor” mean on an everyday basis? ◮ ◮ ◮ Dalma. Unfortunately this isn’t that often.

they analyze surveys conducted in 13 countries: Cote d’Ivoire. Peru. and Timor Leste (East Timor). Panama. Mexico. Guatemala. South Africa. India. and Latin America.2. Nicaragua. More specifically. ◮ 34 / 57 . Tanzania. What does “being poor” mean on an everyday basis? ◮ Banerjee and Duflo (“The economic lives of the poor”. Pakistan. Journal of Economic Perspectives (2007)) exploit household survey data to better understand the everyday life of the poor in Asia. Africa. Papua New Guinea. Indonesia.

◮ ◮ 35 / 57 . they operate this agricultural business alongside a nonagricultural business.2. What does “being poor” mean on an everyday basis? 2. For those who own no land. which is often the case since their piece of land is rarely irrigated. Finding some work outside agriculture is indeed a way for the poor to make productive use of their time when the land is unusable. For those who own a very small plot of land that they cultivate.1. they work the field of local farmers and often combine this activity with non agricultural ones too. Where does the money of the poor come from? ◮ ◮ Many of the poor live in rural areas.

. frying dosas). Poor households have multiple but low value added occupations (they usually have low levels of education and they anyway live in countries with embryonic modern sectors – manufacturing or service sectors). once an individual is done with a task (e.2.. Collecting cow dung and drying it to sell it as a fuel. 36 / 57 ◮ . What does “being poor” mean on an everyday basis? 2.. she starts a new one (e. sewing saris). Where does the money of the poor come from? ◮ Here are examples of such non agricultural activities: ◮ ◮ ◮ ◮ Buying some fruits and vegetables at the wholesalers and selling them on the street. Making dosas (the rice and beans pancakes that almost everyone eats for breakfast in south India) and selling them in front of one’s house.. etc ◮ In the same day.g. Sewing saris (the long piece of decorative cloth that Indian women drape around themselves) and selling them from house to house.1.g.

public schools in these countries are often dysfunctional. What do the poor consume? ◮ ◮ ◮ ◮ ◮ Surprisingly.2. with a very high absence rate among teachers (more than 20%). 37 / 57 . and on alcohol and tobacco (5% of the budget in India). However. Finally. food represents only from 56% to 78% of the 1$ per day that is at the disposal of the poor. the extremely poor spend very little on education. The reason education spending is low is that children in poor households typically attend public schools or other schools that do not charge a fee.2. religious festivals) that stand for 10% of the budget in India. funeral. They spend a non negligible share of their earnings in nonfood items such as festivals (wedding. The expenditure on education generally hovers around 2% of household budgets. What does “being poor” mean on an everyday basis? 2.

or a woman with heavy physical activity. salt.5 by WHO).).. the average “body mass index” (the weight in kilograms divided by the square of the height in meters) is 17. Among the poor adults in Udaipur (India).400 calories a day. tea. about half goes into purchasing more calorific items and half goes into purchasing more expensive (conspicuous) and better tasting (but less calorific) items (sugar. What does “being poor” mean on an everyday basis? 2. the poorest people in India consume on average slightly less than 1.. Even for the extremely poor.2. What do the poor consume? ◮ The most surprising evidence regarding poor households’ consumption is that the poor do not spend much of their budget in buying calories. This is half of what the Indian government recommends for a man with moderate activity. More specifically. 38 / 57 ◮ ◮ .2. for every 1% increase in the food expenditure.8 which is below the standard cutoff for being underweight (that is set at 18.

The poor are frequently sick or weak: ◮ ◮ ◮ 55% of the poor adults in Udaipur are anemic. such as working in the field. or even walking. which means they have an insufficient number of red blood cells.2. What does “being poor” mean on an everyday basis? 2. drawing water from a well. 72% report at least one symptom of disease and 46% report an illness which has left them bedridden or necessitated a visit to the doctor over the last month. 43% of the adults and 34% of the adults aged under 50 report difficulty carrying out at least one of their “activities of daily living”. in India. What do the poor consume? ◮ ◮ The very low number of calories consumed by the poor has a dramatic impact on their health and on their productivity at work.2. 39 / 57 .

Why don’t the poor try to be. less poor? ◮ Why don’t the poor save money (instead of spending it in tobacco. or sugar.3.. What does “being poor” mean on an everyday basis? 2.2. or festivals) to carry out an investment that would make their lives more prosperous in the future (like buying an irrigation system for their land when they have one)? 40 / 57 ..

◮ 41 / 57 . it is not sure that the poor will gather the amount necessary to carry out an investment that would significantly increase their well-being in the future.. their saving potential remains very limited and unlikely to allow them to implement high-returns investments.2. meaning that. Why don’t the poor try to be. less poor? ◮ First of all.3. Some of them are just too poor. What does “being poor” mean on an everyday basis? 2.. even by saving during entire months and years. even by saving the money they would otherwise have spent in festivals or tobacco.

less poor? ◮ Second. he will take it. The money may be stolen (especially if you live in a house that cannot be locked) or grabbed by their spouse or their children.. What does “being poor” mean on an everyday basis? 2. Quarterly Journal of Economics (2002)) of women in a Kenyan slum: “You cannot trust your husband. See the interviews by Anderson and Baland (“The economics of ROSCAS and intrahousehold resource allocation”.2. Why don’t the poor try to be. saving at home is hard (the poor typically have no bank accounts).” ◮ 42 / 57 .3.. If you leave money at home.

What does “being poor” mean on an everyday basis? 2. ◮ ◮ 43 / 57 .. less poor? ◮ Third. because of their poor health status.3. the poor show a high time preference.. This means that the poor tend to focus on their well-being in the present. The higher the time preference. Why don’t the poor try to be. the higher the discount rate placed on returns receivable in the future.2. to die before this future happens. This high time preference of the poor is certainly strongly related to the fact that they have a high probability. and not so much on their well-being in the remote future. Time preferences are captured mathematically by the discount rate.

What does “being poor” mean on an everyday basis? 2.. less poor? ◮ In other words. Why don’t the poor try to be.” “Saving money at home can make you extravagant in using it...). . This is even more true since many of the temptations they are resisting are things that everyone else might take for granted.3. Economic Development and Cultural Change (2007)) of households in Kenya: ◮ ◮ ◮ ◮ “You can’t save alone: it is easy to misuse money.” 44 / 57 . See the interviews by Gugerty (“You can’t save alone: commitment in ROSCAS in Kenya”. to help someone to whom you find it difficult to say “no” – your children. it is difficult for the poor to resist temptations to spend (to buy something..2.

.e: not consuming alcohol and conspicuous products) is not counterbalanced by the perspective of productivity gains in the future. What does “being poor” mean on an everyday basis? 2. 45 / 57 ◮ ◮ . Why don’t the poor try to be. less sugar) would indeed increase their productivity.3. Here again.. less poor? ◮ ◮ Why don’t the poor eat more and better? Eating more and eating better (more grains and iron-rich food. This is specially true since.2. the high time preference of the poor can explain why the sacrifice of eating more and better today (i. and even happiness. the poor would certainly not be able to reach a sufficiently high health status to become fully productive in the future. even by dedicating their entire budget to food.

less poor? ◮ ◮ Why don’t the poor invest more in education? The children of the poor are. by and large. One reason is that poor parents. 46 / 57 ◮ ◮ . going to primary school... who may often be illiterate themselves. However. may have a hard time recognizing that their children are not learning much (for instance. parents are not reacting to the low quality of these schools. either by sending their children to better and more expensive schools or by putting pressure on the local governments to do something about quality in government schools. Why don’t the poor try to be.3.2. What does “being poor” mean on an everyday basis? 2. poor parents in Eastern Uttar Pradesh in India have limited success in predicting whether their school-age children can read).

being poor indeed means being plagued by hunger. diseases and low levels of education (in rural Udaipur.2. What does “being poor” mean on an everyday basis? 2. On an everyday basis. only 5% of women were literate at the time of the 1991 census).4. All in all ◮ The previous evidence has shown us that the one-dimensional poverty line of 1$ a day is able to capture the multi-dimensional reality of poverty. ◮ 47 / 57 .

All in all ◮ Being poor also means not having the “mindset” to improve one’s living. 48 / 57 ◮ ◮ .2. the life of the poor is already extraordinarily difficult. as compared to the proportion of depressed individuals observed among the rest of the population. Sacrificing today for maybe a better life tomorrow is therefore something almost out of reach for them (and it would be out of reach for most of us as well if we shared the same poverty status). As a matter of fact. tense or anxious” due to health problems. What does “being poor” mean on an everyday basis? 2.4. lack of food and the perspective of death (see Case and Deaton (2005)). with a much higher proportion among poor individuals in developing countries reporting to feel “worried.

3. you should care about reducing global poverty even if you are a pure egoist. 49 / 57 . We are indeed all stuck with one another on this planet since global poverty feeds: ◮ ◮ ◮ ◮ ◮ ◮ lower export opportunities for the firms of developed countries South/North migrations terrorism environmental degradation epidemics..1.etc ◮ In other words.. Why must we care? 3. Care if you are an egoist ◮ Global poverty matters a lot even to those Westerners who generally have little regard for what goes on beyond their own borders.

meaning that we think about the most efficient way of working for our self-interest.2. Care if you are an altruist ◮ Economic theory assumes that we are rational individuals. Why must we care? 3. Which of these concerns appears to be the most prominent? ◮ ◮ 50 / 57 . there is widespread evidence that we are not “homines oeconomici” only: we can also show altruistic concerns (although these altruistic concerns may be ultimately rooted into human species’ self-interest. like its ability to perpetuate). However.3.

◮ ◮ 51 / 57 . Care if you are an altruist ◮ Certainly one’s compassion for the poorest/the weakest.3. The maximin principle (also abusively called “Rawlsian altruism”) seems widespread among individuals (suggesting that few of them are pure egoists). a motive that was theorized by Rawls (1971) under the name “maximin principle”. Why must we care? 3.2. a fair allocation of resources should be the one that maximizes the “primary goods” (among which well-being) of the least privileged group. Under the maximin principle.

Why must we care? 3. Of this kind is pity or compassion. the emotion which we feel for the misery of others. which interest him in the fortune of others. and render their happiness necessary to him. Care if you are an altruist ◮ Adam Smith. there are evidently some principles in his nature. in the Theory of Moral Sentiments (1759) already acknowledges its influence on individuals’ behavior: “How selfish soever man may be supposed.3.” ◮ 52 / 57 . though he derives nothing from it except the pleasure of seeing it. or are made to conceive it in a very lively manner.2. when we either see it.

Rawlsian altruism is teased out by the “dictator game”. called the “dictator”. This game was introduced by Kahneman et al. the monetary payoff of player 1 and of player 2 is given by x1 = 1 − s and x2 = s respectively.3. Care if you are an altruist ◮ Experimental economics (which analyzes individuals’ behavior in a controlled laboratory setting) further confirms the presence of Rawlsian altruism in the population. has to decide what share s ∈ [0. 1] of an amount of money normalized to 1 he gives to player 2. (1986). For a given share s. It is a two-person game in which player 1.2. How would you behave in this game if you were a pure egoistic dictator? ◮ ◮ ◮ ◮ 53 / 57 . Why must we care? 3.

Rawlsian altruism is therefore clearly at stake in individuals’ behavior and leads them to oppose the starvation of the poorest (even though their everyday well-being wouldn’t be materially impacted by it). Yet. Forsythe et al.2. Care if you are an altruist ◮ Clearly. (1994) show that 80% of the subjects choose to give a strictly positive share of their initial endowment. you wouldn’t give anything of your initial endowment to your game partner. ◮ ◮ 54 / 57 .3. Why must we care? 3. with 20% choosing to divide this endowment equally.

care twice ◮ As soon as you care about global poverty (should it be because you are a pure egoist or a person mixing egoistic and Rawlsian altruistic concerns). poverty often leads to poverty traps (i.3. If you care. you have to care twice.e: even more poverty).3. Indeed. ◮ 55 / 57 . Why must we care? 3.

56 / 57 ◮ ◮ . involving a vicious cycle in which poverty and underdevelopment lead to more poverty and underdevelopment. care twice ◮ According to Todaro and Smith (2009). community or nation. For instance. often from one generation to the next”. a poverty trap is “a bad equilibrium for a family. Any income shock (it is usually negative) like a severe drought or the death of the head of households will inevitably make the poor plunge into deeper poverty. being poor notably means not having a collateral while it is a necessary condition to access formal credit market.3. If you care. The poor are highly vulnerable. Why must we care? 3.3.

It has also stressed the importance of caring for worldwide poverty reduction. whether one has egoistic or altruistic motivations. ◮ ◮ 57 / 57 . Lecture 3 will present the conceptual toolkit that is at the disposal of development economists to help them fight against poverty. both from a theoretical and from an empirical perspective.Conclusion ◮ Lecture 2 has defined the concept of poverty.

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