Poverty traps and structural poverty in South Africa. Reassessing the evidence from KwaZulu-Natal. CPRC Working Paper No. 82

Abstract

Using three waves of the KwaZulu-Natal Income Dynamics Study (KIDS), panel data collected in South Africa's most populous province between 1993 and 2004, this paper reinvestigates patterns of chronic and structural poverty previously identified from the first two waves. The 2004 wave collected information from 867 households containing core members from 760 households first contacted in 1993. We find that the initial increase in poverty rates has been reversed from an increase between 1993 and 1998 from 52 percent to 57 percent, to a decline to 47 percent. Using asset-based approaches to identify potential poverty traps, our results confirm our previous finding with approximately 30 percent of the KIDS households found to be structurally poor over the eleven year period of the survey, 30 percent structurally never poor, 9 percent structural upward and 7 percent were structurally downward. The remaining 24 percent are in transitory poverty in that the changes in their poverty status arise from either short-term windfalls or shocks, or from measurement error. Seeking an explanation for the persistence of poverty, the only poverty trap for which we find clear evidence when using all three waves is that of low initial education