Moving Up and Out of Poverty: Countries, Communities, and Individuals (446kb PDF)
Deepa Narayan, Soumya Kapoor, and Lant Pritchett
As one part of the overall Moving out of Poverty study, "Ladder of Life" focus groups were conducted in over 450 villages/neighborhoods in 18 study regions in 14 different countries. During the ladder of life exercise the focus groups described the relevant steps or levels of overall well-being of households in their villages and identified those steps on the ladder on which households were in poverty. These focus groups then ranked up to 150 households in their village/neighborhood according to their step on the ladder of life, both now and in the past. The results of this ranking exercise produce a Community Mobility Matrix for each village that can be used to estimate the evolution of prosperity in the village, including the fraction of households that moved out of poverty, the fraction of households that had upward mobility of any kind, and the degree of all mobility (either up or down). Examination of the CMM data reveals three interesting stylized facts. First, there are large local effects in prosperity. Even though the study regions had very different overall economic trajectories (in Malawi there was only a net 4.9 percent of the population moving up versus 46 percent in the studied region of Thailand) the variation in net prosperity and upward movement in poverty across villages within the study regions accounted for nearly 75 percent of all the variation across villages. This suggests that there are important local factors (economic, social, political) affecting households’ transitions out of poverty over and above economy wide and national determinants. Second, upward mobility of the poor and non-poor is tightly linked across villages. Across the 462 villages the estimate of the linear association between upward movement of the non-poor and poor households is .62. Third, there is considerable contextual heterogeneity across regions in the extent to which the fortunes of the poor and non-poor are locally linked, as in some study regions the association of upward mobility of rich and poor is one for one while in other regions to co-movement is near zero.