Poverty trap

By:

James Knight

James is a lead editor for Invezz, where he covers topics from across the financial world, from the stock… read more.

Updated: Aug 20, 2021

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A situation in which poverty outcomes reinforce themselves, acting as causes of poverty. The poverty trap can be defined at individual or individual level is the situation where an unemployed person refrains from taking individual level is the situation where an unemployed person refrains from taking a job because their earnings will disqualify them from claiming unemployment benefits or raise their tax liability, and, as a result, their net income will fall. At the national level, poverty trap refers to the all-pervasive poverty in many less developed countries where the available resources are barely sufficient to meet the basic needs of the population, and the lack of resources for investment acts as the major constraint for economic growth.

Reference: Oxford Press Dictonary of Economics, 5th edt.