Multidimensional Poverty and Interlocking Poverty Traps: Framework and Application to Ethiopian Household Panel Data

This paper examines the impact and potential interactions of health, education and consumption dimensions of persistent poverty at the household level. Our application is to indictors of assets, undernutrition, and illiteracy drawn from the Ethiopia Rural Household Survey (ERHS) panel data set. We develop a framework for operationalizing the concept of multidimensional traps, involving two or more simultaneous distinct poverty dimensions of persistent poverty; these include a subset of cases in which an interlocking poverty trap is effectively formed as a result of deprivations functioning as complements. We test an implication of the multiple trap framework by comparing structural income dynamics across groups. We find that in the poorest of the three main agro-ecological regions in Ethiopia, those with both chronic undernutrition and illiteracy have the lowest implied equilibrium; those with one of these chronic conditions have intermediate (but still deeply poor) equilibria; and those without either condition have the highest asset equilibrium. Evidence for complementarity of persistence across dimensions of poverty - what we term an interlocking poverty trap - is found in only a limited number cases, however. We present several robustness checks for our results.