Shocks

Economic shocks and adverse events are part of the common experience of chronic poverty and their impact on households is likely to reinforce poverty cycles. There is now a vast literature from around the world which documents the long-term impact of shocks on children’s development during early childhood in particular. For example, studies have revealed that malnutrition in the early years of children’s lives may prevent them from developing the brain connections that are essential for learning throughout life, and malnutrition may thus adversely affect education and, eventually, earnings potential in adulthood. Similarly, it has been conclusively shown that climatic shocks during pregnancy or in early childhood can lead to long-term ill-health. Finally, there seems to be growing evidence that such harm early in life also contributes directly to the inter-generational transmission of poverty and social disadvantage.

We demonstrate this by showing a relationship between households being affected by some forms of shock and having an increased chance of either remaining or becoming poor. There are positive indications of how policy can support households either by reducing the extent of shocks (for instance by better environmental resource management or labour protection) or buffering families when these shocks occur (for instance through social protection, insurance or access to affordable credit). These measures can have long-term effects, mitigating the transmission of poverty from one generation to the next.