When endowments and opportunities don’t match: Understanding chronic poverty

Attempts to understand the causes of chronic poverty have largely centred on the concept of the poverty trap. In this perspective, the main focus is on the paucity of initial wealth or endowments, which under certain plausible conditions can create a trap from which a poor person will find it hard to escape without help from outside. While acknowledging the value of insights gained from this perspective, this paper proposes to draw attention to a different perspective that can also prove useful in both understanding the causes of chronic poverty and looking for its solution. Instead of focusing on the level or the magnitude of endowments possessed by the poor, this new perspective focuses on the structure or composition of endowments. The crucial insight offered by this perspective is that chronic poverty can arise not just from low level of endowments but also from a mismatch between the structure of endowments possessed by the poor and the structure of opportunities open to them. This paper is an attempt to elaborate on this insight and to draw out some of its implications, especially its implication for the relationship between growth and poverty.