Here is one summary, consistent with my research and travel experience:
1. "The average person living at under $1 a day does not seem to put
every available penny into buying more calories…Food typically
represents from 56 to 78% [of household spending]."Despite this, hunger is common. Among the extremely poor in Udaipur, only 57% said their household had enough to eat in the previous year, and 72% report at least one symptom of disease.
2.
"The poor generally do not compain about their health – but then they
do not complain about life in general. While the poor certainly feel
poor, their levels of self-reported happiness or health are not
particularly low."3. Spending on festivals – religious ceremonies,
funerals and weddings – is high. In Udaipur, median spending on these
by people living on $1 a day was 10% of income.4. In several countries, the extremely poor spend about 5% of income on alcohol and tobacco.
5. In the Ivory Coast, 14% of people on $1 a day have a TV – and 45% of those on $2 a day have one.
6.
Many of the extremely poor get income from more than one source.
Cultivating their own land is not always the main source of income.7. Participation in microfinance is not as high as you’d think. The poor seem unable to reap economies of scale, therefore.
Here is the underlying paper, by Banerjee and Duflo of MIT, highly recommended, hat tip to Michael Blowhard.
Here is one more controversial bit, I wonder what they see as the relevant alternative:
…it is easy to see why so many of them are entrepreneurs. If you
have few skills and little capital, and especially if you are a woman,
being an entrepreneur is often easier than finding a job: You buy some fruits
and vegetables (or some plastic toys) at the wholesalers and start
selling them on the street; you make some extra dosa mix and sell the
dosas in front of your house; you collect cow dung and dry it to sell
it as a fuel; you attend to one cow and collect the milk. As we saw in
Hyderabad, these are exactly the types of activity the poor are
involved in. It is important, however, not to romanticize the idea of
these penniless entrepreneurs. Given that they have no money,
borrowing is risky, and in any case no one wants to lend to them, the
businesses they run are inevitably extremely small, to the point where
there are clearly unrealized economies of scale. Moreover, given that
so many of these firms have more family labor available to them than
they can use, it is no surprise that they do very little to create jobs
for others. This of course makes it harder for anyone to find a job and
hence reinforces the proliferation of petty entrepreneurs.
I’ll confess I never thought I’d hear an argument that self employment and employing of one’s own family makes it harder for someone else to find a job. That definitely falls into the “you can’t be serious” category. So if they stop being an entrepreneur and look for a job instead, this helps others looking for work? I’ll confess I don’t get it.
The part about the low-complaint level is interesting.
Our troubles are necessearily measured by an absolute index, but they are relative to our environment.
Vouchers anyone?
The reason [household education] spending is low is that children in poor households typically attend public
schools or other schools that do not charge a fee. In countries where poor households spend
more on education, it is typically because government schools have fees (as in Indonesia and
Cote d’Ivoire). What they are doing might therefore be perfectly sensible, given that this is the
reason why public education exists. The one concern comes from the mounting evidence,
reported below, that public schools are often dysfunctional: This could be the reason why even
very poor parents in Pakistan are pulling their children out of public schools and spending
money to send them to private schools.
Still want government ownership of the means of production (in education)?:
In countries where the public provision of education and in health services is
particularly low, private providers have stepped in. In the parts of India where public school
absenteeism is the highest, the fraction of rural children attending private schools is also the
highest (Chaudhury et al., 2005). However, these private schools are less than ideal: They do
have lower teacher absenteeism than the public schools in the same village, but their teachers
are significantly less qualified in the sense of having a formal teaching degree.
Ok, how about government ownership of the means of production in health care instead?:
One sees a similar pattern in healthcare but in a more extreme version. Once again
private providers who serve the poor are less likely to be absent and more likely to examine the
patient with some care than their public counterparts, but they tend to be less well qualified
Brian,
I see much good in microcredit.
But it is all too likely that my support of microcredit
through the Grameen Foundation biases my view.
So I appreciate the microcredit commentary and links
here at Marginal Revolution. They broaden my
understanding.
Mostly the postings here have strengthened my belief
that microcredit does good. Even when studies like
Banerjee and Duflo’s show me that doing it right must
be much harder than it appears in Grameen’s
descriptions of its own work.
John
There are also cultural factors that work against going into business with non-family members. Even in some social subgroups within 1st world nations (the less integrated groups of Australian Aborigines for example), giving a job to be better qualified, rather than your cousin, is seen as wrong.
I wonder how much of (2), the spending on wedding festivals and religious cermonies, is explained by life’s next basic need after food and water?
“Spending on festivals – religious ceremonies, funerals and weddings – is high. In Udaipur, median spending on these by people living on $1 a day was 10% of income.”
Maybe for all the secularists in the Western world, but 10% is not high for people who attend church somewhat regularly. Granted, we have higher disposable income, but Henry has a point.
How much to people with extremely low incomes spend on gambling?
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