n.V1-7.07 | ASSET TRANSFERS AND THE POVERTY THRESHOLD

01| This chapter is about one study, because one study did something nobody else did: it followed 6,000 households in extreme poverty for eleven years after a large randomised asset transfer, and asked not whether the transfer worked but for whom it kept working.

02| The answer is the most important finding in this book part.

"we identify a threshold level of initial assets above which households accumulate assets, take on better occupations (from casual labor in agriculture or domestic services to running small livestock businesses) and grow out of poverty. The reverse happens for those below the threshold."— Balboni, Bandiera, Burgess, Ghatak & Heil (Why Do People Stay Poor?, Quarterly Journal of Economics, 2022, Vol. 137, No. 2, pp. 785–844)

03| Two households, same village, same programme, same transfer. One ends up above a line and accumulates for a decade. The other ends up below it and slides back to where it started. The difference is not effort, character, training or the quality of the implementing organisation. It is where the household stood before the money arrived, relative to a line nobody drew and nobody can see.

04| This reframes almost everything else. The sector's standard question is which model works. The threshold result says a model does not have a single effect at all — it has a different effect on each side of a line, and the average effect reported in an evaluation is a mixture of two opposite outcomes weighted by how many participants happened to start on each side. Two honest trials of the same programme in two countries can report different results purely because the populations sat differently relative to the threshold, and both results would be correct.

05| It also explains a pattern that otherwise looks like a series of unrelated disappointments. Small transfers dissipate. Large ones sometimes do not. Training without capital does nothing. Capital without enough capital does nothing. The graduation package, which is expensive and bundles a substantial asset with the support to hold onto it, is the one design that performs — and it is the one designed, in effect, to deliver households across the line rather than closer to it.

06| The mechanism the authors describe is occupational rather than financial. What changes above the threshold is not the size of the bank balance but the category of work: from selling labour by the day in agriculture or domestic service, to running something that produces on its own. That is a different economic position with different returns, and it is the position, not the money, that compounds. Below the line, the money is consumed by the same daily labour economy it arrived in.

07| Now the two questions this leaves open, both of which the field has failed to take up in the years since.

08| First: what sets the threshold, and does it move? It is described as an asset level, but an asset level is only meaningful against the cost of entering a local occupation — which depends on what occupations exist nearby, what they cost to start, and how many people are already in them. A threshold measured in rural Bangladesh in livestock terms tells you almost nothing about the equivalent line in a Latin American city, where the occupations, the entry costs and the competition are entirely different. Nobody has estimated it anywhere else.

09| Second, and larger: does threshold logic exist outside physical capital? The whole of the sector's capability work — training, education, coaching, network-building, confidence — assumes some equivalent of accumulation: that skills beget opportunities beget better skills. If a capability threshold exists, then persistence becomes a design target with a measurable definition, and programmes can be built and judged against it. If it does not — if the compounding is a property of livestock and stock-in-trade specifically, because those things literally reproduce — then most of what is called capacity-building has no persistence mechanism at all, and the decay results scattered through this book part are exactly what should be expected.

10| That question has not been asked experimentally. It is, on the evidence assembled here, the single most valuable unrun study in the field.