There are several types of dynamic models in which risk and capital constraints come together to create a poverty trap, understood as an initial wealth threshold below which the household will optimally settle into a low level dynamic equilibrium (Carter and Barrett 2006, chapter 53). Households who begin with endowments above that threshold will optimally move toward a higher level equilibrium. The implications are potentially profound because a poverty trap suggests that an unequal agrarian asset distribution that leaves large numbers of households below the critical asset threshold will stagnate and yield high levels of persistent poverty. Zimmerman and Carter (2003, chapter 55) demonstrate how, in the face of such processes, poorer households may not only endogenously opt for asset portfolios of lower expected return and risk in the face of asset price risk and incomplete financial markets, but how they may also intentionally destabilize consumption in order to smooth assets over time, overturning the familiar consumption smoothing hypothesis. The emergence of detailed micro-level panel data sets has sparked a recent empirical literature of micro-level studies of growth, many of which find evidence strongly suggestive of poverty traps and the persistent effects of shocks on the poor (Dercon 1998, chapter 56, 2004; Jalan and Ravallion 2002; Lybbert et al. 2004, chapter 54; Adato, Carter and May 2006; Barrett et al. 2006, Carter et al. 2007; Barrett 2008, chapter 57).
Low agricultural productivity is a key causal factor behind the existence and persistence of poverty traps. When the costs of adoption of new technologies or of entry into emerging high-value markets are non-trivial, the poor commonly cannot afford the initial costs of entry. The resulting frictions generate multiple equilibria, one of which is optimal underinvestment in modern inputs and modern marketing arrangements, thereby trapping some agricultural households in poverty. Marenya and Barrett (2009) illustrate this in the case of fertilizer uptake in rural western Kenya, while Dercon (1998, chapter 56) demonstrates this in the crop-livestock systems of western Tanzania. The upshot is that the introduction of improved seed varieties (Moyo et al. 2007, chapter 58), yield increases (Minten and Barrett 2008, chapter 38), and farm productivity growth more generally (Datt and Ravallion 1998, chapter 59), have all been shown to generate significant poverty reduction, generally faster than that obtainable through the non-agricultural sectors of the economy.
Perhaps the most intuitive mechanism through which agricultural productivity growth facilitates an escape from poverty arises from the impact of expanded supply on food prices, nutrient intake and human health. For most of human history, lives were short and unhealthy due in large measure to insufficient nutrient intake. Malthus’ well-known explanation was that human population growth routinely overtaxed the Earth’s capacity to provide sufficient food, leading to regular famines. Since the 18th century, however, dozens of countries have escaped widespread hunger and premature death due largely to dramatic advances in food availability and associated income growth broadening access to a satisfactory diet. The apparent reinforcing feedback between nutritional status and productivity has led several scholars to hypothesize that the escape from the nutritional poverty trap helped to catalyze the unprecedentedly rapid and widespread advance of living standards over the past 300 years (Dasgupta 1993; 1997, chapter 61; Fogel 2004).
Much of this progress stems from greater food availability made possible by agricultural technological change associated with plant breeding, improved agronomic practices such as intercropping and crop rotations, irrigation, and the emergence of mechanical implements and chemical fertilizers. Food security has therefore often been equated with food availability, typically measured in terms of satisfaction of dietary energy requirements, such as calories per person per day, such that food insecurity arises due to insufficient and unstable production. An availability-based view of food security naturally leads policymakers to pursue food self-sufficiency strategies, to ensure domestic production will suffice to feed the population, although these can prove highly inefficient (Anderson 1986; Krueger et al. 1988, chapter 13, 1991; Johnson 1997, chapter 12).
The second generation of thinking on food security stems directly from Sen (1981a, p.1, emphasis in original), whose famous opening sentences underscore that “starvation is the characteristic of some people not having enough food to eat. It is not the characteristic of there being not enough food to eat. While the latter can be a cause of the former, it is but one of many possible causes.” Ironically, Sen (1981a, 1981b, chapter 60) eschewed the concept of food security, focusing instead on the “entitlements” of individuals and households. Sen shifted the focus from supply side issues associated with aggregate food availability toward individual access to food, and thus to the role of (perhaps idiosyncratic) demand failure due to unemployment, adverse movement in the terms of trade, production failure, termination of transfers, or other forms of “entitlement failure.” Sen thus placed increased emphasis not only on traditional economic variables of incomes and prices, but equally on human rights and on the legal institutions of the state, as well as the moral and social norms of cultures. This perspective mirrored the renewed attention paid to institutional issues in technology development and diffusion and in agricultural commercialization.
The emergent third generation view of food security builds on food availability and access measures to introduce more explicit attention to risk, dynamics and the complex health consequences of nutrient deficiencies (Barrett 2002). By expanding the conceptualization of food insecurity beyond production, prices and incomes, the literature of the past decade or so more closely relates food insecurity to poverty, to social, economic, and political disenfranchisement, and to structural patterns of control over (financial, human, and natural) resources and of access to markets, technologies, and finance (Drèze and Sen 1989), and has largely discredited single-causal explanations (Ravallion 1997, chapter 62). But with dozens of countries still lacking adequate food availability to meet the dietary needs of their residents, even if distribution were perfectly equitable, longstanding concerns about food production per capita maintain their currency in the 21st century (Barrett 2010, chapter 63).
Increased appreciation of the complex causation of food insecurity – that it is not simply a function of aggregate food availability – have paralleled growing appreciation for the heterogeneous experiences of individuals within the same household, with respect to food consumption, nutrient intake, health, and many other dimensions. Just as more nuanced insights on food insecurity have forced reconsideration of longstanding theories of hunger, so have more fine-grained observations of intra-household dynamics induced economists to reexamine long-prevailing theories of intra-household decision-making. The basic household model treats utility as a function of the per capita levels of consumption and leisure. Such representations are only valid to the extent that intra-household inequality in the distribution of goods is trivial or unimportant to individual household members. While inter-household inequality is clearly non-trivial, growing evidence that intra-household inequality can also be non-trivial sparked the growth of a literature, and eventually policies, focused on intra-household distribution.
Drawing on Philippine data, Folbre (1984) provocatively argued that observed patterns of intra-household inequality were hard to rationalize with any model that assumed beneficent maximization of a unified, family utility function. Building on the nascent intra-household bargaining literature (e.g., McElroy and Horney 1981), analysis of the rural household in developing countries began to explore models that replaced the unified household – or “benevolent paternal dictator” – model with a household bargaining function based on individual utility functions and threat points based on the assets that the individual can carry away from the household should it dissolve as well as the external legal and social environment that shapes individuals’ ability to use those assets.
Even assuming that household members can make and costlessly enforce bargains over all resource allocation decisions, this individualized or deconstructed household models yields a number of important insights. Chief among these are that interventions that influence the exit option of one household member may affect the intra-household distribution of goods. For example, interventions that enhance men’s legal and economic control over land resources in an effort to enhance ‘household welfare’ may actually weaken women’s bargaining power and decrease their and their children’s well-being. As a consequence of the weight of the theoretical and empirical evidence built up around this point (Haddad and Kanbur 1990, chapter 66; Pitt, Rosenzweig and Hassan 1990, chapter 67; Haddad et al. 1997, Quisumbing 2003), a number of rural development policies have been designed with the intra-household bargaining equilibrium in mind. Examples include efforts to assure that both men and women benefit from land titling programs (Deere and León 2001) as well as efforts to target social transfers to women with the expectation that enhancing women’s economic endowments improves child outcomes because women’s preferences favor children relative to men’s preferences.
Linking back to a core thread of the agricultural development literature, intra-household bargaining can also result in inefficient production patterns in the sense of failure to equalize returns to factors of production allocated among different household production activities (Jones 1983, chapter 64, Udry 1996, chapter 65). While these production-side issues have proven difficult to study, the preponderance of evidence that bargaining matters for household expenditure priorities continues to shape and reshape a broad range of agricultural interventions in low-income countries. The course of agricultural development matters to individual and household-level experiences in sometimes unexpected ways.