On why poor people stay poor and the ripple effects of wealth.
Why do poor people stay poor?
It’s a question that everyone already seems to have an answer for.
“The poor are lazy.”
“The poor can’t manage money.”
“The poor don’t have the right mindset.”
These theories are anecdotal at best and downright insulting at worst. The
problem with these arguments is that they are based on small sample sizes rather than empirical data. While I agree that some people are poor because of these things, there has been little experimental research done on this topic…until now.
Earlier this year researchers at the London School of Economics released a paper titled, “Why Do People Stay Poor?” that illustrated how the lack of initial wealth (and not motivation or talent) is what keeps people in poverty. The researchers tested this by randomly allocating wealth (i.e. livestock) to female villagers in Bangladesh and then waited to see how that wealth transfer would affect their future finances. As their paper states:
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