Extreme Poverty in Sub-Saharan Africa and the Randomized Controlled Trials

Africa in the World Economy

Question 1

Part a

Extreme poverty is defined as surviving with less than $1.90 per day based on the 2011 international dollar. The assumptions mean that the daily expenditures, including food, transport, and other essential expenses, for a person living in extreme poverty is below $2. Globally, 10% of the population, or up to 700 million people, lives in extreme poverty (WB, 2016). According to the world bank, 41.1% of the global population living in extreme poverty is in sub-Saharan Africa. This figure surpasses a combination of North Africa & Middle East, Latin America & Caribbean, East Asia & Pacific, and Europe & Central America. Thus, the statement that more of the world’s people in extreme poverty live in sub-Saharan Africa is true.

Part b

Of the total global population, up to 10% live in extreme poverty. Of this 10%, 41% are found in sub-Saharan Africa. That means more than half of the global population living in extreme poverty is not living in Africa. Assuming that the world has 9 billion people, then going by the 10% figure, close to 900 million people are living extreme poverty. Recent estimates indicate that Africa is 1.14 billion people, of which 0.47 billion live in extreme poverty. In other words, over 0.67 billion residents of sub-Saharan Africa do not live-in extreme poverty. Thus, the statement that most people in sub-Saharan Africa live in extreme poverty is false.

Relationship Between Part a and Part b

Statements a and b are related because one can be confused for the other, which may result in a false perception of Africa. Statement a place most people in the world live in extreme poverty in Africa. Statement b, on the other hand, Statement B suggests that the majority of Africans in the sub-Saharan region live in extreme poverty. These distinctions must be highlighted so that the relationship between a and b do not result in a false generalization of Africa.

Question 3

The Solow Model is regarded as an exogenous model in economic growth. The model allows individuals to assess or analyze the changes in diverse sectors, such as labor, capital accumulation, and productivity growth influenced by advancement in technology (Boyko et al., 2019). Notably, the main focus is on long-term economic growth, defined the investments and savings in the economy. Also, the country's income levels grow and the rate of productivity within the nation. Therefore, policymakers focus on how to enhance economic growth and ensure that there is consistency in growing savings and investments. An increased rate of savings and investment positively impacts national income growth. The poverty trap focuses on an economy that makes it hard for individuals to escape poverty. In the poverty trap, individuals are hardly able to make any savings (Grassetti et al., 2018). The poverty trap is created because of limited factors to economic growth, such as access to credit and poor government policies (Loría, 2020). In the incentives model, savings and investment act as incentives for economic growth. In the incentives model, the focus usually shifts from overly depending on aid to formulating appropriate policies and institutionalizing economic incentives.   Figure 1: An illustration of the poverty trap model

Part a Therefore, it is true that there is some level of aid sufficient to get any developing country out of poverty. Aid provides a means for countries to invest and accelerate economic growth. While the utilization of aid varies depending on the specific needs of the region or country, proper investments can enhance economic activities and address the inequalities within the economy. This can offer residents incentives to invest and save within the economy. Therefore, individuals will be able to escape the poverty trap and advance economically. This also affirms the incentive model where savings are used for investment and other income generating activities. The graph below shows the impact of aid on economic growth (Galliani et al., 2017).   Part b It is true that the country's per capita income depends on where its per capita income is now. The current per capita income aligns with the incentive model, where individuals are able to save and invest in activities that lead to economic growth. Notably, it is the current level of per capita income that will assist people escape the poverty trap by engaging in activities that lead to growth. While there are diverse factors that influence per capita income growth in the long run. The current level of per capita income also influences positively or negatively the other factors that contribute to income growth (Duflo, 2021). These aspects include education, employment, and health. This is illustrated by the formula to calculate per capita income growth rate: Y = (K – X) / X Where: Y is the rate of per capita income growth K is the per capita income in present year X is the per capita income in base year Therefore, the formula clearly shows that the per capita income growth has a strong influence on the future growth. Part c Government policies and institutions are not the main determinants of development. This is because other factors influence growth and development within a country. While policies are central in guaranteeing economic growth, it is vital to have diverse aspects to ensure holistic growth within the economy. Based on the incentive model, the government policies are some of the ways through which growth can be realized. On the other hand, the poverty trap can be escaped through efficient policies. Other factors that determine growth include educational level, access to credit, rate of investments, and employment. The policies are vital in offering incentives for investment and saving, which can impact the long-term growth in the economy. Part d It is false that growth accelerates when a developing country exits poverty. During the poverty phase, the nation is usually fighting against the poverty trap and initiate incentives to enhance growth. Notably, economic growth is usually higher when a nation is still under the poverty phase. This is when proper policies can assist a nation escape the poverty phase, leading to accelerated economic growth. After exiting the poverty phase, a nation is at a higher risk of decelerating flattening the growth curve. This is because all the factors of development will be operating optimally and people are satisfied with the quality of life. After exiting that phase, there is a significant reduction in the economic growth rate.

Question 4

According to Nunn and Qian (2014), humanitarian aid is among the core policy tools used by international communities to alleviate suffering and hunger in developing nations. A key area where such aid has been directed is countries torn with civil conflict. There is a debate whether such aid helps or only worsens such conflicts is already a sign that there is a problem with aid. Indeed, as Deaton (2010) argued, the shift from 'if aid is effective' to 'which aid is effective' is already an indication that food aid may fuel civil war. A key area of contention is who receives the food aid when two or more factions are fighting for control. Giving aid to one faction means strengthening it against other factions. In this case, a government can be a faction, which means the civil war will rage with the recipient assumed to be a puppet of the international community. Giving food aid to all factions means empowering them to pursue war since they have food security, and giving it to the meek means it can be taken away by the dominant group by force. Such aid neither stops the war nor makes life better in the long run. Thus, the statement that food aid causes civil war to worsen in the recipient country is accurate.

Part a

Identification of causality from air to war implies conducting experiments or field research to establish a link between foreign aid and war, i.e., if it exists. Deaton (2010) notes that one of the biggest problems with identifying this causality is that the structure and equilibrium differ in ways that uphold different types of causal relations. As a result, a trial with conclusive evidence in one setting may not be applicable in another setting (Galiani et al., 2017). For example, conditional cash transfers will improve child health only if functional clinics are available and accessible. Where such clinics are not available, the conditional transfer of funds will not improve child health. Deaton (2013) summarizes that when local conditions are hostile to development, aid is not valuable will result in harm if it ...