Poverty Traps (DP IB Economics)

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Steve Vorster

Written by: Steve Vorster

Reviewed by: Jenna Quinn

Understanding Poverty Trap

  • There are many causes of poverty. However, poor countries have several common characteristics which can be summarised in a poverty cycle diagram

5-2--poverty

Poverty is caused by a lack of both economic growth and human development
  

Development

  • Low wages: represent the intersection of economic growth and human development and are the major cause of poverty

    • Low wages are usually the result of unemployment, informal employment, a lack of skills, or a primary sector based economy
       

  • Low levels of education and healthcare: cost money and with lower wage levels these are not accessible

    • People find it harder to stay well or to recover from illness
       

  • Low levels of human capital: low education and healthcare lead to low levels of human capital, which reduces productivity
      

  • Low productivity: results in low wages and the cycle continues 
     

Growth

  • Low wages: represent the intersection of economic growth and human development and are the major cause of poverty 

  • Low saving: with low wage levels it is much harder to save as any money is spent on necessities

  • Low investment: savings drive investment as firms are able to borrow money from commercial banks. Low levels of savings mean that banks have less money available for investment

  • Low economic growth: low levels of investment hold back productivity and economic growth

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Steve Vorster

Author: Steve Vorster

Expertise: Economics & Business Subject Lead

Steve has taught A Level, GCSE, IGCSE Business and Economics - as well as IBDP Economics and Business Management. He is an IBDP Examiner and IGCSE textbook author. His students regularly achieve 90-100% in their final exams. Steve has been the Assistant Head of Sixth Form for a school in Devon, and Head of Economics at the world's largest International school in Singapore. He loves to create resources which speed up student learning and are easily accessible by all.

Jenna Quinn

Author: Jenna Quinn

Expertise: Head of New Subjects

Jenna studied at Cardiff University before training to become a science teacher at the University of Bath specialising in Biology (although she loves teaching all three sciences at GCSE level!). Teaching is her passion, and with 10 years experience teaching across a wide range of specifications – from GCSE and A Level Biology in the UK to IGCSE and IB Biology internationally – she knows what is required to pass those Biology exams.