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Digging out of poverty not just luck

Nov. 12, 2010 at 11:06 PM   |   Comments

BOSTON, Nov. 12 (UPI) -- U.S. and Thai researchers say they found a number of factors, including education, are instrumental in helping people dig out of poverty.

Economists Anan Pawasutipaisit of Thammasat University in Thailand and Robert Townsend of Massachusetts Institute of Technology in Boston studied households in four Thai provinces to learn who might be most successful and why.

Over the course of the seven-year study, poor households grew their net worth by an average of 22 percent per year while rich households grew by just 0.09 percent.

The paper, published in the Journal of Econometrics, suggests poor people who skillfully manage existing assets, have a high rate of saving and high return on assets, succeed in improving their net worth. The researchers said those making profits reinvested their money in their small businesses and farms -- suggesting they were well aware of the source of their success.

The most successful households tended have more highly-educated household members, a younger age head of household, a higher ratio of debt to assets and a preference for formal financial markets over informal ones, the researchers say.

"The data seem to show pretty conclusively that successful households are not just lucky," Townsend says in a statement. "They are doing something systematic, month after month, year after year. The next step, of course, is to figure out what the associated skills and attitudes really are."

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