Economic lives of the poor

Understanding how poor people make economic choices and how their spending decisions are shaped is fundamental to providing them with affordable good and services such as housing, clean drinking water and health services and products. If we can become better at identifying what people want and what they choose to spend their meager incomes on (rather than assuming we know what they need), we can move closer to giving them access to those resources.

Acumen Fund’s Pakistan office came across a paper published by two directors at the Abdul Latif Jameel Poverty Action Lab at MIT, which provides interesting (and some surprising) insights into how the poor make economic choices. The paper uses survey data from 13 countries to document the economic lives of the poor (those living on less than $2 dollars per day per capita at purchasing power parity) or the extremely poor (those living on less than $1 dollar per day). It describes their patterns of consumption and income generation as well as their access to markets and publicly provided infrastructure. The paper concludes with a discussion of some apparent anomalous choices.