Social Development and Public Governance > Social Development > Intergenerational Transmission of Poverty
The Intergenerational Transmission of Poverty: Some Causes and Policy Implications
By Tarsicio Castaņeda (04/99, En)
This paper was prepared as a background document for the seminar, Breaking the Poverty Cycle: Investing in Early Childhood, held March 14, 1999, in Paris, France during the IDB's Annual Meeting. The paper is not a final publication; it is a discussion draft still subject to revision. The findings, interpretations and conclusions of this paper reflect those of the authors and should not be attributed to the Inter-American Development Bank.
The intergenerational transmission of poverty (ITP)--the process by which poor parents transmit poverty and disadvantage to their children--appears to be a common problem in Latin America that lies behind its highly skewed income distribution. According to a recent study by CEPAL, only about 20% of children of poorly educated parents are able to finish secondary education, a level judged the minimum for a person to be able to move out of poverty. At the economy and societal level, the ITP process may be retarding growth, producing violence --as a result of lack of social cohesion and equality of opportunities--and may be a threat to major economic reforms that require government fiscal restraint and economic restructuring. The situation is particularly worrisome because under current inequality levels and predicted slow economic growth for the region (1.9% per year for 1995-2005), the predicted number of poor children will increase to 44 million for the year 2005.
The purpose of this report is to investigate the effects of family background factors in determining the intergenerational transmission of poverty in Latin America, drawing on a review of recent studies and empirical work done for this study. Based on the findings of this investigation, the report discusses policy implications and government programs to break the ITP process. The empirical results are based on a sample of Peruvian families that were interviewed in 1985 and 1994 and on the analysis of sixteen countries' cross-sectional data sets obtained from sample surveys in those countries.
The framework of analysis to select intervening factors and interpret the results of the empirical study was the quantity-quality interaction model of Becker-Lewis (1973) and Becker (1991) in which the number of children and the investments in them are jointly determined and bear an inverse relationship due to limited income and resource constraints. The effects of mother's education is critical because it acts by increasing productivity in the market place--and hence inducing higher labor force participation--and in home production inducing investments in education and other measures of child quality. What is important in this model is that it helps explain why even small changes in mother's education can result in great reductions in fertility and consequent great increases in child investments, thus, helping to break the ITP cycle.
Last updated: 01/16/07
