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The top 11 causes of poverty around the world

Feb 3, 2022

Approximately 10% of the world’s population lives in extreme poverty. But why? Updated for 2022, we look at 11 of the top causes of poverty around the world.

For most of us, living on less than $2 a day seems far removed from reality. But it is the reality for roughly 800 million people around the globe. Approximately 10% of the global population lives in extreme poverty, meaning that they're living below the poverty line of $1.90 per day.

There is some good news: In 1990, that figure was 1.8 billion people. We've made progress. But in the last few years we've also begun to move backwards — in 2019, estimates were closer to 600 million people living in extreme poverty. Climate change and conflict have both hindered progress. The global economic impact of the COVID-19 pandemic only made matters worse.

There’s no one single solution to poverty . There isn't a single cause of poverty, either. In fact, most cases of poverty in 2022 are the result of a combination of factors. Understanding what these factors are and how they work together is a critical step to sustainably ending poverty.

Learn more about the causes of poverty — and how we're solving them

1. inequality.

Let's start with something both simple and complex: Inequality is easy enough to understand as a concept. When one group has fewer rights and resources based on an aspect of their identity compared to others in a community, that's inequality. This marginalization could be based on caste, ability, age, health, social status or — most common and most pervasive — gender.

How inequality functions as a cause of poverty, however, is a bit more multifaceted. When people are given fewer rights or assets based on their ethnicity or tribal affiliation, that means they have fewer opportunities to move ahead in life. We see this often in gender inequality , especially when women have fewer rights around their health and economic power. In this case, equality isn't even relative. It doesn't matter that someone has more. What matters is that someone else doesn't have enough.

This is especially harmful when inequality is combined with risk — which is the basic formula we use at Concern to understand the cycle of poverty . A widow raising a family of five won't have the same resources available to her husband. If she lives in an area vulnerable to the effects of climate change, that puts pressure on what few resources she has. In some countries, this is the rule rather than the exception.

To address inequality, we must consider all groups in a community. What's more, to build equality we have to consider equality of results, as opposed to equality of resources.

2. Conflict

If poverty is caused by inequality multiplied by risk, let's talk about risks. At the top of the list of risks for poverty is conflict . Large-scale, protracted crises, such as the decade of civil war in Syria , can grind an otherwise thriving economy to a halt. As fighting continues in Syria, for example, millions have fled their homes (often with nothing but the clothes on their backs). Public infrastructure has been destroyed. Prior to 2011, as few as 10% of Syrians lived below the poverty line. Ten years later, more than 80% of Syrians now live below the poverty line.

But the nature of conflict has changed in the last few decades, and violence has become more localized. This also has a huge impact on communities, especially those that were already struggling. In some ways, it's even harder to cope as these crises go ignored in headlines and primetime news. Fighting can stretch out for years, if not decades, and leave families in a permanent state of alert. This makes it hard to plan for the long-term around family businesses, farms, or education.

A Syrian refugee woman shows the torn plastic covers of her tent in the village of Shir Hmyrin, in Akkar.

3. Hunger, malnutrition, and stunting

You might think that poverty causes hunger (and you would be right!). But hunger is also a cause — and maintainer — of poverty . If a person doesn’t get enough food, they’ll lack the strength and energy needed to work. Or their immune system will weaken from malnutrition and leave them more susceptible to illness that prevents them from getting to work.

In Ethiopia, stunting contributes to GDP losses as high as 16%.

This can lead to a vicious cycle, especially for children. From womb to world, the first 1,000 days of a child’s life are key to ensuring their future health. For children born into low-income families, health is also a key asset to their breaking the cycle of poverty. However, if a mother is malnourished during pregnancy, that can be passed on to her children. The costs of malnutrition may be felt over a lifetime: Adults who were stunted as children earn, on average, 22% less than those who weren't stunted. In Ethiopia, stunting contributes to GDP losses as high as 16%.

Workitt Kassaw Ali, who, along with her husband, Ketamaw, joined Concern Ethiopia’s ReGrade program in 2017.

4. Poor healthcare systems — especially for mothers and children

As we saw above with the effects of hunger, extreme poverty and poor health go hand-in-hand. In countries with weakened health systems, easily-preventable and treatable illnesses like malaria , diarrhea, and respiratory infections can be fatal. Especially for young children.

When people must travel far distances to clinics or pay for medicine, it drains already vulnerable households of money and assets. This can tip a family from poverty into extreme poverty. For women in particular, pregnancy and childbirth can be a death sentence. Maternal health is often one of the most overlooked areas of healthcare in countries that are still built around patriarchal structures. New mothers and mothers-to-be are often barred from seeking care without their father's or husband's permission. Adolescent girls who are pregnant (especially out of wedlock) face even greater inequities and discrimination.

5. Little (or zero) access to clean water, sanitation, and hygiene

Currently, more than 2 billion people don’t have access to clean water at home. This means that people collectively spend 200 million hours every day walking long distances to fetch water. That’s precious time that could be used working, or getting an education to help secure a job later in life. And if you guessed that most of these 200 million hours are shouldered by women and girls… you're correct. Water is a women's issue as well as a cause of poverty.

Contaminated water can also lead to a host of waterborne diseases, ranging from the chronic to the life-threatening. Poor water infrastructure — such as sanitation and hygiene facilities — can compound this. It can also create other barriers to escaping poverty, such as preventing girls from going to school during their cycles.

Concern Community workers Justin Mwihire Bulunga and Anita Kalamo help construct a hand washing station

6. Climate change

Climate change causes poverty , working as an interdependent link between not only extreme poverty but also many of the other causes on this list — including hunger , conflict, inequality, and a lack of education (see below). One report from the World Bank estimates that the climate crisis has the power to push more than 100 million people into poverty over the next decade.

Many of the world’s poorest populations rely on farming or hunting and gathering to eat and earn a living. Malawi, as an example, is 80% agrarian. They often have only just enough food and assets to last through the next season, and not enough reserves to fall back on in the event of a poor harvest. So when climate change or natural disasters (including the widespread droughts caused by El Niño ) leave millions of people without food, it pushes them further into poverty, and can make recovery even more difficult.

How climate change keeps people in poverty

By 2030, climate change could force more than 100 million people into extreme poverty.

7. Lack of education

Not every person without an education is living in extreme poverty. But most adults living in extreme poverty did not receive a quality education. And, if they have children, they're likely passing that on to them. There are many barriers to education around the world , including a lack of money for uniforms and books or a cultural bias against girls’ education .

But education is often referred to as the great equalizer. That's because it can open the door to jobs and other resources and skills that a family needs to not just survive, but thrive. UNESCO estimates that 171 million people could be lifted out of extreme poverty if they left school with basic reading skills. Poverty threatens education, but education can also help end poverty .

Classmates following a class 6 lesson at the Muslim Brotherhood School in Masakong

8. Poor public works and infrastructure

What if you have to go to work, but there are no roads to get you there? Or what if heavy rains have flooded your route and made it impossible to travel? We're used to similar roadblocks (so to speak) in the United States. But usually we can rely on our local governments to step in.

A lack of infrastructure — from roads, bridges, and wells, to cables for light, cell phones, and internet — can isolate communities living in rural areas. Living off the grid often means living without the ability to go to school, work, or the market to buy and sell goods. Traveling further distances to access basic services not only takes time, it costs money, keeping families in poverty.

As we've found in the last two years, isolation limits opportunity. Without opportunity, many find it difficult, if not impossible, to escape extreme poverty.

9. Global health crises including epidemics and pandemics

Speaking of things we've learned over the last two years… A poor healthcare system that affects individuals, or even whole communities, is one cause of poverty. But a large-scale epidemic or pandemic merits its own spot on this list. COVID-19 isn't the first time a public health crisis has fueled the cycle of poverty. More localized epidemics like Ebola in West Africa (and, later, in the DRC ), cholera in Haiti or the DRC, or malaria in Sierra Leone have demonstrated how local and national governments can grind to a halt while working to stop the spread of a disease, provide resources to frontline workers and centers, and come up with contingency plans as day-to-day life is disrupted.

All of this comes, naturally, at a cost. In Guinea, Liberia , and Sierra Leone — the three countries hit hardest by the 2014-16 West African Ebola epidemic — an estimated $2.2 billion was lost across all three countries' GDPs in 2015 as a direct result of the epidemic. This included losses in the private sector, agricultural production, and international trade.

The crisis in Kenya: Climate, COVID, and hunger

The worst drought in four decades, the worst locust invasion in seven, plus the domino effects of a global pandemic have northern Kenyans living out an underreported crisis and facing an uncertain future.

10. Lack of social support systems

In the United States, we're familiar with social welfare programs that people can access if they need healthcare or food assistance. We also pay into insurances against unemployment and fund social security through our paychecks. Theses systems ensure that we have a safety net to fall back on if we lose our job or retire.

But not every government can provide this type of help to its citizens. Without that safety net, there’s nothing to stop vulnerable families from backsliding further into extreme poverty. Especially in the face of the unexpected.

11. Lack of personal safety nets

If a family or community has reserves in place, they can weather some risk. They can fall back on savings accounts or even a low-interest loan in the case of a health scare or an unexpected layoff, even if the government doesn't have support systems to cover them. Proper food storage systems can help stretch a previous harvest if a drought or natural disaster ruins the next one.

At its core, poverty is a lack of basic assets or a lack on return from what assets a person has.

People living in extreme poverty can't rely on these safety nets, however. At its core, poverty is a lack of basic assets or a lack on return from what assets a person has. This leads to negative coping mechanisms, including pulling children out of school to work (or even marry ), and selling off assets to buy food. That can help a family make it through one bad season, but not another. For communities constantly facing climate extremes or prolonged conflict, the repeated shocks can send a family reeling into extreme poverty and prevent them from ever recovering.

Solutions to Poverty to Get Us To 2030

What would Zero Poverty look like for the world in 2030? Here are a few starting points.

How can you help?

At Concern, we believe that zero poverty is possible, especially when we work with communities to address both inequalities and risks. Last year, we reached 36.9 million people with programs designed to address the specific causes of extreme poverty in countries, communities, and families.

Pictured in the banner image for this story is one of those people, Adrenise Lusa. Born 60 years ago in the DRC's Manono Territory, Adrenise joined Concern's Graduation program in 2019 and participated in trainings on income generation and entrepreneurship, which gave her ideas on how to increase her production and income. With monthly cash transfers as part of Graduation and a loan from her community Village Savings and Loans Association, she invested in a few income-generating activities including goat rearing and trading oil, maize, and cassava. Prior to joining Graduation, she had the ideas. But, as she explains, "I didn’t start these businesses because I just didn’t have enough money."

Since launching her new ventures, Adrenise has increased her income from approximately 30,000 francs per month to anywhere between 100–400,000 francs per month, depending on the season. She's used her additional income to buy a plot of land and build a new house, feed her family with more nutritious food, and send her son and daughter to university.

You can make your own impact by supporting our efforts working with the world’s poorest communities. Learn more about the other ways you can help the fight against poverty.

More about the causes of poverty

Extreme Poverty and Hunger: A Vicious Cycle

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Miracle Foundation

Transform the lives of orphan children and change their story.

Stories: THE MIRACLE BLOG

The miracle blog, understanding the root causes of global poverty.

Marissa Ratton

On the marketing team at Miracle Foundation, and frequent blog contributor.

Publication Date: February 8, 2024

Overcoming poverty is a complex issue. By understanding and tackling the underlying reasons behind poverty, we can take strides toward creating a world where poverty is replaced with hope and opportunity.

Four Global Causes of Poverty:

Structural Inequality: The first step is to recognize the impact of structural inequalities within societies. These inequalities create disparities in access to resources, opportunities, and decision-making power, and addressing them is essential for breaking the cycle of poverty.
Limited Access to Education: Educational opportunities serve as a gateway out of poverty, yet millions encounter barriers such as inadequate infrastructure, gender-based discrimination, and economic constraints. Bridging the global education gap is vital for empowering communities and eliminating global poverty. We must ensure that every child goes to school and thrives in the educational environment. And actively commit to breaking down barriers and creating a pathway for a brighter future.
Economic Injustice: Unfair economic systems contribute significantly to global poverty. Exploitative labor practices, unequal distribution of wealth, and limited access to credit and resources hinder the economic progress of vulnerable populations. Addressing these economic injustices is critical to a sustainable poverty solution.
Social Discrimination and Exclusion: Marginalized social groups often bear the brunt of poverty’s weight disproportionately. In our pursuit of a world where everyone has an equal opportunity to thrive, combating social discrimination and fostering inclusivity becomes imperative. At the core of our mission lies the commitment to helping families thrive; we recognize that they are the heartbeat of flourishing communities.

The elimination of global poverty demands comprehensive and collaborative solutions. At Miracle Foundation, we approach our work strategically, guided by data-driven decisions, utilizing our Thrive Scale™ methodology . We strive to create a pathway for a brighter, more equitable future by connecting people with necessary resources and support. We are unwavering in our mission to contribute to the global effort of eradicating poverty and fostering thriving, empowered communities worldwide.

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The top 11 causes of poverty around the world

Approximately 10% of the world’s population lives in extreme poverty. But why? Updated for 2022, we look at 11 of the top causes of poverty around the world.

There’s no one catchall solution to poverty, nor is there a single cause of poverty. In fact, most cases of poverty in 2022 are the result of a combination of factors. Understanding what these factors are and how they work together is a critical step to sustainably ending poverty.

1. Inequality

Let's start with something both simple and complex: Inequality is easy enough to understand as a concept. When one group has fewer rights and resources based on an aspect of their identity compared to others in a community, that's inequality. This marginalisation could be based on caste, ability, age, health, social status or — most common and most pervasive — gender.

How inequality functions as a cause of poverty, however, is a bit more multifaceted. When people are given fewer rights or assets based on their ethnicity or tribal affiliation, that means they have fewer opportunities to move ahead in life. We see this often in gender inequality, especially when women have fewer rights around their health and economic power. In this case, equality isn't even relative. It doesn't matter that someone has more. What matters is that someone else doesn't have enough.

This is especially harmful when inequality is combined with risk — which is the basic formula we use at Concern to understand the cycle of poverty. A widow raising a family of five won't have the same resources available to her husband. If she lives in an area vulnerable to the effects of climate change, that puts pressure on what few resources she has. In some countries, this is the rule rather than the exception.

To address inequality, we must consider all groups in a community. What's more, to build equality we have to consider equality of results, as opposed to equality of resources.

2. Conflict

If poverty is caused by inequality multiplied by risk, let's talk about risks. At the top of the list of risks for poverty is conflict. Large-scale, protracted crises, such as the 11 years of civil war in Syria, can grind an otherwise thriving economy to a halt. As fighting continues in Syria, for example, millions have fled their homes, often with nothing but the clothes on their backs. Public infrastructure has been destroyed. Prior to 2011, as few as 10% of Syrians lived below the poverty line. Now, more than 80% of Syrians now live below the poverty line.

A Syrian refugee woman sits in her informal home in Lebanon

But the nature of conflict has changed in the last few decades, and violence has become more localised. This has a huge impact on communities, especially those that were already struggling. In some ways, it's even harder to cope as these crises go ignored in headlines and primetime news. Fighting can stretch out for years, if not decades, and leave families in a permanent state of alert. This makes it hard to plan for the long-term around family businesses, farms, or education.

3. Hunger, malnutrition, and stunting

You might think that poverty causes hunger, and you would be right!. But hunger is also a cause — and maintainer — of poverty. If a person doesn’t get enough food, they’ll lack the strength and energy needed to work. Or their immune system will weaken from malnutrition and leave them more susceptible to illness that prevents them from getting to work.

4. Poor healthcare systems — especially for mothers and children

As we saw above with the effects of hunger, extreme poverty and poor health go hand-in-hand. In countries with weakened health systems, easily preventable and treatable illnesses like malaria, diarrhoea, and respiratory infections can be fatal. Especially for young children.

5. Little (or zero) access to clean water, sanitation, and hygiene

A young girl collecting water in Central African Republic

6. Climate change

Climate change causes poverty, working as an interdependent link between not only extreme poverty but also many of the other causes on this list — including hunger, conflict, inequality, and a lack of education (see below). One report from the World Bank estimates that the climate crisis has the power to push more than 100 million people into poverty over the next decade.

Many of the world’s poorest populations rely on farming or hunting and gathering to eat and earn a living. Malawi, as an example, is 80% agrarian. They often have only just enough food and assets to last through the next season, and not enough reserves to fall back on in the event of a poor harvest. So when climate change or natural disasters (including the widespread droughts caused by El Niño) leave millions of people without food, it pushes them further into poverty, and can make recovery even more difficult.

7. Lack of education

Not every person without an education is living in extreme poverty. But most adults living in extreme poverty did not receive a quality education. And, if they have children, they're likely passing that on to them. There are many barriers to education around the world, including a lack of money for uniforms and books or a cultural bias against girls’ education.

But education is often referred to as the great equaliser. That's because it can open the door to jobs and other resources and skills that a family needs to not just survive, but thrive. UNESCO estimates that 171 million people could be lifted out of extreme poverty if they left school with basic reading skills. Poverty threatens education, but education can also help end poverty.

8. Poor public works and infrastructure

What if you have to go to work, but there are no roads to get you there? Or what if heavy rains have flooded your route and made it impossible to travel? We're used to similar roadblocks (so to speak) in Ireland. But usually we can rely on our local governments to step in.

A lack of infrastructure — from roads, bridges, and wells, to cables for light, cellphones and internet — can isolate communities living in rural areas. Living off the grid often means living without the ability to go to school, work, or the market to buy and sell goods. Traveling further distances to access basic services not only takes time, it costs money, keeping families in poverty.

As we've found in the last two years, isolation limits opportunity. Without opportunity, many find it difficult, if not impossible, to escape extreme poverty.

9. Global health crises including epidemics and pandemics

Speaking of things we've learned over the last two years… A poor healthcare system that affects individuals, or even whole communities, is one cause of poverty. But a large-scale epidemic or pandemic merits its own spot on this list. COVID-19 isn't the first time a public health crisis has fueled the cycle of poverty. More localised epidemics like Ebola in West Africa (and, later, in the DRC), cholera in Haiti or the DRC, or malaria in Sierra Leone have demonstrated how local and national governments can grind to a halt while working to stop the spread of a disease, provide resources to frontline workers and centers, and come up with contingency plans as day-to-day life is disrupted.

All of this, naturally, comes at a cost. In Guinea, Liberia, and Sierra Leone — the three countries hit hardest by the 2014-16 West African Ebola epidemic — an estimated $2.2 billion was lost across all three countries' GDPs in 2015 as a direct result of the epidemic. This included losses in the private sector, agricultural production, and international trade.

Members of Concern Worldwide's "Burial Team 7" attend the home of a 44 year old woman, who it's suspected died of ebola in the New England area of Freetown, on Wednesday night. 73 people were buried in on Wednesday October 29th in Western Area, which includes Freetown and its suburbs. All home deaths in the city are now attended by medical burial teams.

10. Lack of social support systems

In Ireland, we're familiar with social welfare programmes that people can access if they need healthcare or food assistance. We also pay into insurances against unemployment and fund social security through our paychecks. These systems ensure that we have a safety net to fall back on if we lose our job or when we retire.

11. Lack of personal safety nets

At its core, poverty is a lack of basic assets or a lack on return from what assets a person has.

People living in extreme poverty can't rely on these safety nets, however. At its core, poverty is a lack of basic assets or a lack on return from what assets a person has. This leads to negative coping mechanisms, including pulling children out of school to work (or even marry), and selling off assets to buy food. That can help a family make it through one bad season, but not another. For communities constantly facing climate extremes or prolonged conflict, the repeated shocks can send a family reeling into extreme poverty and prevent them from ever recovering.

How can you help?

At Concern, we believe that zero poverty is possible, especially when we work with communities to address both inequalities and risks. Last year, we reached 36.9 million people with programmes designed to address the specific causes of extreme poverty in countries, communities, and families.

Pictured in the banner image for this story is one of those people, Adrenise Lusa. Born 60 years ago in the DRC's Manono Territory, Adrenise joined Concern's Graduation programme in 2019 and participated in trainings on income generation and entrepreneurship, which gave her ideas on how to increase her production and income. With monthly cash transfers as part of Graduation and a loan from her community Village Savings and Loans Association, she invested in a few income-generating activities including goat rearing and trading oil, maize, and cassava.

Prior to joining Graduation, she had the ideas. But, as she explains, "I didn’t start these businesses because I just didn’t have enough money". Since launching her new ventures, Adrenise has increased her income from approximately 30,000 francs per month to anywhere between 100–400,000 francs per month, depending on the season. She's used her additional income to buy a plot of land and build a new house, feed her family with more nutritious food, and send her son and daughter to university. You can make your own impact by supporting our efforts working with the world’s poorest communities. Learn more about the other ways you can help the fight against poverty.

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11 top causes of global poverty.

Around 8% of the world’s population lives in extreme poverty — but do you know why? We look at 11 of the top causes of global poverty.

Living on less than $2 a day feels like an impossible scenario, but’s a reality for around 600 million people in our world today. Approximately 8% of the global population lives in extreme poverty, commonly defined as surviving on only $1.90 a day, or less

There is some good news: In 1990, that figure was 1.8 billion people, so serious progress has been made. While many wonder if we can really end extreme poverty , we at Concern believe the end is not only possible — but possible within our lifetimes. There’s no “magic bullet” solution to poverty , but understanding its causes is a good first step. Here are 11 of those causes, fully revised for 2020.

1. INEQUALITY AND MARGINALIZATION

“Inequality” is an easy, but sometimes misleading term used to describe the systemic barriers leaving groups of people without a voice or representation within their communities. For a population to escape poverty, all groups must be involved in the decision-making process — especially when it comes to having a say in the things that determine your place in society. Some of these may be obvious, but in other situations, it can be subtle.

Gender inequality, caste systems, marginalization based on race or tribal affiliations are all economic and social inequalities that mean the same thing: Little to no access to the resources needed to live a full, productive life. When combined with different combinations of vulnerability and hazards which comprise the rest of this list — a marginalized community may become even more vulnerable to the cycle of poverty .

2. CONFLICT

Conflict is one of the most common forms of risk driving poverty today. Large-scale, protracted violence that we’ve seen in areas like Syria can grind society to a halt, destroying infrastructure and causing people to flee (often with nothing but the clothes on their backs). In its tenth year of conflict, Syria’s middle class has been all but destroyed, and over 80% of the population now lives below the poverty line.

But even small bouts of violence can have huge impacts on communities that are already struggling. For example, if farmers are worried about their crops being stolen, they won’t invest in planting. Women also bear the brunt of conflict , which adds a layer of inequality to all conflict: During periods of violence, female-headed households become very common. And because women often have difficulty getting well-paying work and are typically excluded from community decision-making, their families are particularly vulnerable.

3. HUNGER, MALNUTRITION, AND STUNTING

You might think that poverty causes hunger (and you would be right!), but hunger is also a cause — and maintainer — of poverty. If a person doesn’t get enough food, they’ll lack the strength and energy needed to work (or their immune system will weaken from malnutrition and leave them more susceptible to illness that prevents them from getting to work).

The first 1,000 days of a child’s life (from womb to world) are key to ensuring their future health and likelihood of staying out of poverty. If a mother is malnourished during pregnancy, that can be passed on to her children, leading to wasting (low weight for height) or stunting (low height for age). Child stunting , both physical and cognitive, can lead to a lifetime of impacts: Adults who were stunted as children earn, on average, 22% less than those who weren’t stunted. In Ethiopia, stunting contributes to GDP losses as high as 16%.

ADULTS WHO WERE STUNTED AS CHILDREN EARN, ON AVERAGE, 22% LESS THAN THOSE WHO WEREN’T STUNTED. IN ETHIOPIA, STUNTING CONTRIBUTES TO GDP LOSSES AS HIGH AS 16%.

4. POOR HEALTHCARE SYSTEMS — ESPECIALLY FOR MOTHERS AND CHILDREN

Extreme poverty and poor health often go hand in hand. In countries where health systems are weak, easily preventable and treatable illnesses like malaria, diarrhea, and respiratory infections can be fatal — especially for young children. And when people must travel far distances to clinics or pay for medicine, it drains already vulnerable households of money and assets, and can tip a family from poverty into extreme poverty.

For some women, pregnancy and childbirth can be a death sentence. In many of the countries where Concern works, access to quality maternal healthcare is poor. Pregnant and lactating mothers face a multitude of barriers when seeking care, from not being allowed to go to a clinic without a male chaperone to receiving poor or even abusive care from a doctor. This is especially true for adolescent girls aged 18 and under, leaving mothers-to-be and their children at increased risk for disease and death.

5. LITTLE OR NO ACCESS TO CLEAN WATER, SANITATION, AND HYGIENE

Currently, more than 2 billion people don’t have access to clean water at home. This means that people (which is to say, women and girls) collectively spend some 200 million hours every day walking long distances to fetch water. That’s precious time that could be used working, or getting an education to help secure a job later in life.

Contaminated water can also lead to a host of waterborne diseases, ranging from the chronic to the life-threatening. Poor water infrastructure — such as sanitation and hygiene facilities — can compound this, or create other barriers to escaping poverty, such as keeping girls out of school during menstruation.

6. CLIMATE CHANGE

Climate change creates hunger , whether through too little water (drought) or too much ( flooding ), and its effects contribute to the cycle of poverty in several other ways including disproportionately affecting women, creating refugees, and even influencing conflict. One World Bank estimates that climate change has the power to push more than 100 million people into poverty over the next decade.

Many of the world’s poorest populations rely on farming or hunting and gathering to eat and earn a living — for example, Malawi is 80% agrarian. They often have only just enough food and assets to last through the next season, and not enough reserves to fall back on in the event of a poor harvest. So when climate change or natural disasters (including the widespread droughts caused by El Niño ) leave millions of people without food, it pushes them further into poverty, and can make recovery even more difficult.

7. LACK OF EDUCATION

Not every person without an education is living in extreme poverty. But most of the extremely poor don’t have an education. There are many barriers to education around the world , including a lack of money for uniforms and books, a bias against girls’ education , or many of the other causes of poverty mentioned here.

But education is often referred to as the great equalizer, because it can open the door to jobs and other resources and skills that a family needs to not just survive, but thrive. UNESCO estimates that 171 million people could be lifted out of extreme poverty if they left school with basic reading skills. Poverty threatens education, but education can also help end poverty .

8. POOR PUBLIC WORKS AND INFRASTRUCTURE

Imagine that you have to go to work, but there are no roads to get you there. Or heavy rains have flooded your route and made it impossible to travel. A lack of infrastructure — from roads, bridges, and wells, to cables for light, cell phones, and internet — can isolate communities living in rural areas. Living off the grid often means living without the ability to go to school, work, or the market to buy and sell goods. Traveling further distances to access basic services not only takes time, it costs money, keeping families in poverty.

Isolation limits opportunity. Without opportunity, many find it difficult, if not impossible, to escape extreme poverty.

ISOLATION LIMITS OPPORTUNITY.

9. LACK OF GOVERNMENT SUPPORT

Many people living in the United States are familiar with social welfare programs that people can access if they need healthcare or food assistance. But not every government can provide this type of help to its citizens — and without that safety net, there’s nothing to stop vulnerable families from backsliding further into extreme poverty. Ineffective governments also contribute to several of the other causes of extreme poverty mentioned above, as they are unable to provide necessary infrastructure or healthcare, or ensure the safety and security of their citizens in the event of conflict.

10. LACK OF JOBS OR LIVELIHOODS

This might seem like a no-brainer: Without a job or a livelihood, people will face poverty. Dwindling access to productive land (often due to conflict, overpopulation, or climate change) and overexploitation of resources like fish or minerals puts increasing pressure on many traditional livelihoods. In the Democratic Republic of Congo (DRC) for example, most of the population lives in rural communities where natural resources have been plundered over centuries of colonial rule — while conflict over land has forced people away from their source of income and food. Now, more than half of the country lives in extreme poverty.

11. LACK OF RESERVES

All of the above risk factors — from conflict to climate change or even a family illness — can be weathered if a family or community has reserves in place. Cash savings and loans can offset unemployment due to conflict or illness. Proper food storage systems can help if a drought or natural disaster ruins a harvest.

People living in extreme poverty usually don’t have these means available. This means that, when a risk turns into a disaster, they turn to negative coping mechanisms, including pulling children out of school to work (or even marry ), and selling off assets to buy food. That can help a family make it through one bad season, but not another. For communities constantly facing climate extremes or prolonged conflict, the repeated shocks can send a family reeling into extreme poverty and prevent them from ever recovering.

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Homi kharas and homi kharas senior fellow - global economy and development , center for sustainable development meagan dooley meagan dooley former senior research analyst - global economy and development , center for sustainable development.

February 2, 2022

The last 30 years have seen dramatic reductions in global poverty, spurred by strong catch-up growth in developing countries, especially in Asia. By 2015, some 729 million people, 10% of the population, lived under the $1.90 a day poverty line, greatly exceeding the Millennium Development Goal target of halving poverty. From 2012 to 2013, at the peak of global poverty reduction, the global poverty headcount fell by 130 million poor people.

This success story was dominated by China and India. In December 2020, China declared it had eliminated extreme poverty completely . India represents a more recent success story. Strong economic growth drove poverty rates down to 77 million, or 6% of the population, in 2019. India will, however, experience a short-term spike in poverty due to COVID-19, before resuming a strong downward path. By 2030, India is likely to essentially eliminate extreme poverty, with less than 5 million people living below the $1.90 line. By 2030, the only Asian countries that are unlikely to meet the goal of ending extreme poverty are Afghanistan, Papua New Guinea, and North Korea.

In other parts of the world, poverty trends are disappointing. In Latin America, poverty fell rapidly at the beginning of this century but has been rising since 2015, with no substantial reductions forecast by the end of this decade. In Africa, poverty has been rising steadily, thanks to rapid population growth and stagnant economic growth. Exacerbated by a pandemic-induced rise in poverty of 11%, African poverty shows little signs of decline through 2030.

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By: Joe Hasell , Max Roser , Esteban Ortiz-Ospina and Pablo Arriagada

Global poverty is one of the most pressing problems that the world faces today. The poorest in the world are often undernourished , without access to basic services such as electricity and safe drinking water ; they have less access to education , and suffer from much poorer health .

In order to make progress against such poverty in the future, we need to understand poverty around the world today and how it has changed.

On this page you can find all our data, visualizations and writing relating to poverty. This work aims to help you understand the scale of the problem today; where progress has been achieved and where it has not; what can be done to make progress against poverty in the future; and the methods behind the data on which this knowledge is based.

Key Insights on Poverty

Measuring global poverty in an unequal world.

There is no single definition of poverty. Our understanding of the extent of poverty and how it is changing depends on which definition we have in mind.

In particular, richer and poorer countries set very different poverty lines in order to measure poverty in a way that is informative and relevant to the level of incomes of their citizens.

For instance, while in the United States a person is counted as being in poverty if they live on less than roughly $24.55 per day, in Ethiopia the poverty line is set more than 10 times lower – at $2.04 per day. You can read more about how these comparable national poverty lines are calculated in this footnote. 1

To measure poverty globally, however, we need to apply a poverty line that is consistent across countries.

This is the goal of the International Poverty Line of $2.15 per day – shown in red in the chart – which is set by the World Bank and used by the UN to monitor extreme poverty around the world.

We see that, in global terms, this is an extremely low threshold indeed – set to reflect the poverty lines adopted nationally in the world’s poorest countries. It marks an incredibly low standard of living – a level of income much lower than just the cost of a healthy diet .

From $1.90 to $2.15 a day: the updated International Poverty Line

What you should know about this data.

Global poverty data relies on national household surveys that have differences affecting their comparability across countries or over time. Here the data for the US relates to incomes and the data for other countries relates to consumption expenditure. 2
The poverty lines here are an approximation of national definitions of poverty, made in order to allow comparisons across the countries. 1
Non-market sources of income, including food grown by subsistence farmers for their own consumption, are taken into account. 3
Data is measured in 2017 international-$, which means that inflation and differences in the cost of living across countries are taken into account. 4

Global extreme poverty declined substantially over the last generation

Over the past generation extreme poverty declined hugely. This is one of the most important ways our world has changed over this time.

There are more than a billion fewer people living below the International Poverty Line of $2.15 per day today than in 1990. On average, the number declined by 47 million every year, or 130,000 people each day. 5

The scale of global poverty today, however, remains vast. The latest global estimates of extreme poverty are for 2019. In that year the World Bank estimates that around 650 million people – roughly one in twelve – were living on less than $2.15 a day.

Extreme poverty: how far have we come, how far do we still have to go?

Extreme poverty here is defined according to the UN’s definition of living on less than $2.15 a day – an extremely low threshold needed to monitor and draw attention to the living conditions of the poorest around the world. Read more in our article, From $1.90 to $2.15 a day: the updated International Poverty Line .
Global poverty data relies on national household surveys that have differences affecting their comparability across countries or over time. 2
Surveys are less frequently available in poorer countries and for earlier decades. To produce regional and global poverty estimates, the World Bank collates the closest survey for each country and projects the data forward or backwards to the year being estimated. 6
Data is measured in 2017 international-$, which means that inflation and differences in the cost of living across countries are taken into account . 4

The pandemic pushed millions into extreme poverty

Official estimates for global poverty over the course of the Coronavirus pandemic are not yet available.

But it is clear that the global recession it brought about has had a terrible impact on the world’s poorest.

Preliminary estimates produced by researchers at the World Bank suggest that the number of people in extreme poverty rose by around 70 million in 2020 – the first substantial rise in a generation – and remains around 70-90 million higher than would have been expected in the pandemic’s absence. On these preliminary estimates, the global extreme poverty rate rose to around 9% in 2020. 7

Figures for 2020-2022 are preliminary estimates and projections by World Bank researchers, based on economic growth forecasts. The pre-pandemic projection is based on growth forecasts prior to the pandemic. You can read more about this data and the methods behind it in the World Bank’s Poverty and Shared Prosperity 2022 report. 8

Hundreds of millions will remain in extreme poverty on current trends

Extreme poverty declined during the last generation because the majority of the poorest people on the planet lived in countries with strong economic growth – primarily in Asia.

The majority of the poorest now live in Sub-Saharan Africa, where weaker economic growth and high population growth in many countries has led to a rising number of people living in extreme poverty.

The chart here shows projections of global extreme poverty produced by World Bank researchers based on economic growth forecasts. 9

A very bleak future is ahead of us should such weak economic growth in the world’s poorest countries continue – a future in which extreme poverty is the reality for hundreds of millions for many years to come.

The extreme poverty estimates and projections shown here relate to a previous release of the World Bank’s poverty and inequality data in which incomes are expressed in 2011 international-$. The World Bank has since updated its methods, and now measures incomes in 2017 international-$. As part of this change, the International Poverty Line used to measure extreme poverty has also been updated: from $1.90 (in 2011 prices) to $2.15 (in 2017 prices). This has had little effect on our overall understanding of poverty and inequality around the world. You can read more about this change and how it affected the World Bank estimates of poverty in our article From $1.90 to $2.15 a day: the updated International Poverty Line .
Figures for 2018 and beyond are preliminary estimates and projections by Lakner et al. (2022), based on economic growth forecasts. You can read more about this data and the methods behind it in the related blog post. 10
Data is measured in 2011 international-$, which means that inflation and differences in the cost of living across countries are taken into account. 4

The rapid progress seen in many countries shows an end to poverty is possible

Each of the countries shown in the chart achieved large declines in extreme poverty over the last generation. 11

The fact that rapid progress against poverty has been achieved in many places is one of the most important lessons we can learn from the available data on extreme poverty.

For those who are not aware of such progress – which is the majority of people – it would be easy to make the mistake of believing that poverty is inevitable and that action to tackle poverty is hence doomed to fail.

The huge progress seen in so many places shows that this view is incorrect.

Interactive visualization requires JavaScript.

After 200 years of progress the fight against global poverty is just beginning

Over the past two centuries the world made good progress against extreme poverty. But only very recently has poverty fallen at higher poverty lines.

Global poverty rates at these higher lines remain very high:

25% of the world lives on less than $3.65 per day – a poverty line broadly reflective of the lines adopted in lower-middle income countries.
47% of the world lives on less than $6.85 per day – a poverty line broadly reflective of the lines adopted in upper-middle income countries.
84% live on less than $30 per day – a poverty line broadly reflective of the lines adopted in high income countries. 12

Economic growth over the past two centuries has allowed the majority of the world to leave extreme poverty behind. But by the standards of today’s rich countries, the world remains very poor. If this should change, the world needs to achieve very substantial economic growth further still.

The history of the end of poverty has just begun

How much economic growth is necessary to reduce global poverty substantially?

The data from 1981 onwards is based on household surveys collated by the World Bank. Earlier figures are from Moatsos (2021), who extends the series backwards based on historical reconstructions of GDP per capita and inequality data. 13
All data is measured in international-$ which means that inflation and differences in purchasing power across countries are taken into account. 4
The World Bank data for the higher poverty lines is measured in 2017 international-$. Recently, the World Bank updated its methodology having previously used 2011 international-$ to measure incomes and set poverty lines. The Moatsos (2021) historical series is based on the previously-used World Bank definition of extreme poverty – living on less than $1.90 a day when measured in 2011 international-$. This is broadly equivalent to the current World Bank definition of extreme poverty – living on less than $2.15 a day when measured in 2017 international-$. You can read more about this update to the World Bank’s methodology and how it has affected its estimates of poverty in our article From $1.90 to $2.15 a day: the updated International Poverty Line .
The global poverty data shown from 1981 onwards relies on national household surveys that have differences affecting their comparability across countries or over time. 2
Such surveys are less frequently available in poorer countries and for earlier decades. To produce regional and global poverty estimates, the World Bank collates the closest survey for each country and projects the data forward or backwards to the year being estimated. 6
Non-market sources of income, including food grown by subsistence farmers for their own consumption, are taken into account. This is also true of the historical data – in producing historical estimates of GDP per capita on which these long-run estimates are based, economic historians take into account such non-market sources of income, as we discuss further in our article How do we know the history of extreme poverty?

Explore Data on Poverty

About this data.

All the data included in this explorer is available to download in GitHub , alongside a range of other poverty and inequality metrics.

Where is this data sourced from?

This data explorer is collated and adapted from the World Bank’s Poverty and Inequality Platform (PIP).

The World Bank’s PIP data is a large collection of household surveys where steps have been taken by the World Bank to harmonize definitions and methods across countries and over time.

About the comparability of household surveys

There is no global survey of incomes. To understand how incomes across the world compare, researchers need to rely on available national surveys.

Such surveys are partly designed with cross-country comparability in mind, but because the surveys reflect the circumstances and priorities of individual countries at the time of the survey, there are some important differences.

Income vs expenditure surveys

One important issue is that the survey data included within the PIP database tends to measure people’s income in high-income countries, and people’s consumption expenditure in poorer countries.

The two concepts are closely related: the income of a household equals their consumption plus any saving, or minus any borrowing or spending out of savings.

One important difference is that, while zero consumption is not a feasible value – people with zero consumption would starve – a zero income is a feasible value. This means that, at the bottom end of the distribution, income and consumption can give quite different pictures about a person’s welfare. For instance, a person dissaving in retirement may have a very low, or even zero, income, but have a high level of consumption nevertheless.

The gap between income and consumption is higher at the top of this distribution too, richer households tend to save more, meaning that the gap between income and consumption is higher at the top of this distribution too. Taken together, one implication is that inequality measured in terms of consumption is generally somewhat lower than the inequality measured in terms of income.

In our Data Explorer of this data there is the option to view only income survey data or only consumption survey data, or instead to pool the data available from both types of survey – which yields greater coverage.

Other comparability issues

There are a number of other ways in which comparability across surveys can be limited. The PIP Methodology Handbook provides a good summary of the comparability and data quality issues affecting this data and how it tries to address them.

In collating this survey data the World Bank takes a range of steps to harmonize it where possible, but comparability issues remain. These affect comparisons both across countries and within individual countries over time.

To help communicate the latter, the World Bank produces a variable that groups surveys within each individual country into more comparable ‘spells’. Our Data Explorer provides the option of viewing the data with these breaks in comparability indicated, and these spells are also indicated in our data download .

Global and regional poverty estimates

Along with data for individual countries, the World Bank also provides global and regional poverty estimates which aggregate over the available country data.

Surveys are not conducted annually in every country however – coverage is generally poorer the further back in time you look, and remains particularly patchy within Sub-Saharan Africa. You can see that visualized in our chart of the number of surveys included in the World Bank data by decade.

In order to produce global and regional aggregate estimates for a given year, the World Bank takes the surveys falling closest to that year for each country and ‘lines-up’ the data to the year being estimated by projecting it forwards or backwards.

This lining-up is generally done on the assumption that household incomes or expenditure grow in line with the growth rates observed in national accounts data. You can read more about the interpolation methods used by the World Bank in Chapter 5 of the Poverty and Inequality Platform Methodology Handbook.

How does the data account for inflation and for differences in the cost of living across countries?

To account for inflation and price differences across countries, the World Bank’s data is measured in international dollars. This is a hypothetical currency that results from price adjustments across time and place. It is defined as having the same purchasing power as one US-$ would in the United States in a given base year. One int.-$ buys the same quantity of goods and services no matter where or when it is spent.

There are many challenges to making such adjustments and they are far from perfect. Angus Deaton ( Deaton, 2010 ) provides a good discussion of the difficulties involved in price adjustments and how this relates to global poverty measurement.

But in a world where price differences across countries and over time are large it is important to attempt to account for these differences as well as possible, and this is what these adjustments do.

In September 2022, the World Bank updated its methodology, and now uses international-$ expressed in 2017 prices – updated from 2011 prices. This has had little effect on our overall understanding of poverty and inequality around the world. But poverty estimates for particular countries vary somewhat between the old and updated methodology. You can read more about this update in our article From $1.90 to $2.15 a day: the updated International Poverty Line .

To allow for comparisons with the official data now expressed in 2017 international-$ data, the World Bank continues to release its poverty and inequality data expressed in 2011 international-$ as well. We have built a Data Explorer to allow you to compare these, and we make all figures available in terms of both sets of prices in our data download .

Absolute vs relative poverty lines

This dataset provides poverty estimates for a range of absolute and relative poverty lines.

An absolute poverty line represents a fixed standard of living; a threshold that is held constant across time. Within the World Bank’s poverty data, absolute poverty lines also aim to represent a standard of living that is fixed across countries (by converting local currencies to international-$). The International Poverty Line of $2.15 per day (in 2017 international-$) is the best known absolute poverty line and is used by the World Bank and the UN to measure extreme poverty around the world.

The value of relative poverty lines instead rises and falls as average incomes change within a given country. In most cases they are set at a certain fraction of the median income. Because of this, relative poverty can be considered a metric of inequality – it measures how spread out the bottom half of the income distribution is.

The idea behind measuring poverty in relative terms is that a person’s well-being depends not on their own absolute standard of living but on how that standard compares with some reference group, or whether it enables them to participate in the norms and customs of their society. For instance, joining a friend’s birthday celebration without shame might require more resources in a rich society if the norm is to go for an expensive meal out, or give costly presents.

Our dataset includes three commonly-used relative poverty lines: 40%, 50%, and 60% of the median.

Such lines are most commonly used in rich countries, and are the main way poverty is measured by the OECD and the European Union .More recently, relative poverty measures have come to be applied in a global context. The share of people living below 50 per cent of median income is, for instance, one of the UN’s Sustainable Development Goal indicators . And the World Bank now produces estimates of global poverty using a Societal Poverty Line that combines absolute and relative components.

When comparing relative poverty rates around the world, however, it is important to keep in mind that – since average incomes are so far apart – such relative poverty lines relate to very different standards of living in rich and poor countries.

Does the data account for non-market income, such as food grown by subsistence farmers?

Many poor people today, as in the past, rely on subsistence farming rather than a monetary income gained from selling goods or their labor on the market. To take this into account and make a fair comparison of their living standards, the statisticians that produce these figures estimate the monetary value of their home production and add it to their income/expenditure.

Research & Writing

Despite making immense progress against extreme poverty, it is still the reality for every tenth person in the world.

$2.15 a day: the updated International Poverty Line

What does the World Bank’s updated methods mean for our understanding of global poverty?

Global poverty over the long-run

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Joe Hasell and Max Roser

Breaking out of the Malthusian trap: How pandemics allow us to understand why our ancestors were stuck in poverty

The short history of global living conditions and why it matters that we know it

Poverty & economic growth.

The economies that are home to the poorest billions of people need to grow if we want global poverty to decline substantially

Global poverty in an unequal world: Who is considered poor in a rich country? And what does this mean for our understanding of global poverty?

What do poor people think about poverty?

Three billion people cannot afford a healthy diet

Hannah Ritchie

Homelessness and poverty in rich countries

Esteban Ortiz-Ospina

OWID Data Collection: Inequality and Poverty

Joe Hasell and Pablo Arriagada

Interactive Charts on Poverty

Official definitions of poverty in different countries are often not directly comparable due to the different ways poverty is measured. For example, countries account for the size of households in different ways in their poverty measures.

The poverty lines shown here are an approximation of national definitions, harmonized to allow for comparisons across countries. For all countries apart from the US, we take the harmonized poverty line calculated by Jolliffe et al. (2022). These lines are calculated as the international dollar figure which, in the World Bank’s Poverty and Inequality Platform (PIP) data, yields the same poverty rate as the officially reported rate using national definitions in a particular year (around 2017).

For the US, Jolliffe et al. (2022) use the OECD’s published poverty rate – which is measured against a relative poverty line of 50% of the median income. This yields a poverty line of $34.79 (measured using 2017 survey data). This however is not the official definition of poverty adopted in the US. We calculated an alternative harmonized figure for the US national poverty using the same method as Jolliffe et al. (2022), but based instead on the official 2019 poverty rate – as reported by the U.S. Census Bureau.

You can see in detail how we calculated this poverty line in this Google Colabs notebook .

Jolliffe, Dean Mitchell, Daniel Gerszon Mahler, Christoph Lakner, Aziz Atamanov, and Samuel Kofi Tetteh Baah. 2022. Assessing the Impact of the 2017 PPPs on the International Poverty Line and Global Poverty. The World Bank. Available to read at the World Bank here .

Because there is no global survey of incomes, researchers need to rely on available national surveys. Such surveys are designed with cross-country comparability in mind, but because the surveys reflect the circumstances and priorities of individual countries at the time of the survey, there are some important differences. In collating this survey data the World Bank takes steps to harmonize it where possible, but comparability issues remain.

One important issue is that, whilst in most high-income countries the surveys capture people’s incomes, in poorer countries these surveys tend to capture people’s consumption. The two concepts are closely related: the income of a household equals their consumption plus any saving, or minus any borrowing or spending out of savings.

To help communicate the latter, the World Bank produces a variable that groups surveys within each individual country into more comparable ‘spells’ (which we include in our data download ). Our Data Explorer provides the option of viewing the data with these breaks in comparability indicated.

The international-$ is a hypothetical currency that results from price adjustments across time and place. It is defined as having the same purchasing power as one US-$ in a given base year – in this case 2017. One int.-$ buys the same quantity of goods and services no matter where or when it is spent. There are many challenges to making such adjustments and they are far from perfect. But in a world where price differences across countries and over time are large it is important to attempt to account for these differences as well as possible, and this is what these adjustments do. Read more in our article From $1.90 to $2.15 a day: the updated International Poverty Line .

According to World Bank data, in 1990 there were 2.00 billion people living in poverty, and in 2019 that had fallen to 0.648 billion. The average fall over the 29 years in between is: (2.00 billion – 0.648 billion)/29 = 46.6 million. Dividing by the number of days (29 x 365) gives the average daily fall: (2.00 billion – 0.648 billion)/(29 x 365) = 128,000. (All figures rounded to 3 significant figures).

The projections are generally made on the assumption that incomes or expenditure grow in line with the growth rates observed in national accounts data. You can read more about the interpolation methods used by the World Bank in Chapter 5 of the Poverty and Inequality Platform Methodology Handbook.

We use the figures presented in the World Bank’s Poverty and Shared Prosperity 2022 report. Earlier estimates were also published in Lakner, C., Mahler, D.G., Negre, M. et al. How much does reducing inequality matter for global poverty?. J Econ Inequal (2022). https://doi.org/10.1007/s10888-021-09510-w . Available online here .

Earlier estimates were also published in Lakner, C., Mahler, D.G., Negre, M. et al. How much does reducing inequality matter for global poverty?. J Econ Inequal (2022). https://doi.org/10.1007/s10888-021-09510-w . Available online here .

The figures are taken from a World Bank blog post by Nishant Yonzan, Christoph Lakner and Daniel Gerszon Mahler. The post builds on and updates the estimates published by Lakner et al. (2022).In September 2022, the World Bank changed from using 2011 international-$ to 2017 international-$ in the measurement of global poverty. The International Poverty Line used by the World Bank and the UN to define extreme poverty was accordingly updated from $1.90 a day (in 2011 prices) to $2.15 (in 2017 prices).In order to match up to the projected figures, the extreme poverty estimates shown here relate to a previous release of the World Bank’s data using data expressed in 2011 prices, which vary slightly from the latest data in 2017 prices. You can read more about this change and how it affected the World Bank estimates of poverty in our article From $1.90 to $2.15 a day: the updated International Poverty Line .Lakner, C., Mahler, D.G., Negre, M. et al. How much does reducing inequality matter for global poverty?. J Econ Inequal (2022). https://doi.org/10.1007/s10888-021-09510-w . Available online here .

We use the figures provided in the blog post, which extend the methods presented in Lakner et al. (2022).Lakner, C., Mahler, D.G., Negre, M. et al. How much does reducing inequality matter for global poverty?. J Econ Inequal (2022). https://doi.org/10.1007/s10888-021-09510-w . Available online here .

Shown are those countries with a decline of more than 30 percentage points over a period of 15 years or more.There are a number of ways in which comparability across the different household surveys on which this data is based can be limited. These affect comparisons both across countries and within individual countries over time.The World Bank’s Poverty and Inequality Platform Methodology Handbook provides a good summary of the comparability and data quality issues affecting this data and how it tries to address them. In collating this survey data the World Bank takes a range of steps to harmonize it where possible, but comparability issues remain. To help communicate the latter, the World Bank produces a variable that groups surveys within each individual country into more comparable ‘spells’. Our Data Explorer provides the option of viewing the data with these breaks in comparability indicated.

You can read more about how the World Bank sets these higher poverty lines, as well as the International Poverty Line against which it measures extreme poverty, in our article From $1.90 to $2.15 a day: the updated International Poverty Line . To the three poverty lines adopted officially by the World Bank – $2.15, $3.65 and $6.85 – we add a higher line broadly consistent with definitions of poverty in high income countries. See our article Global poverty in an unequal world: Who is considered poor in a rich country? And what does this mean for our understanding of global poverty?

For details of the methods used to produce the long-run poverty data see, Moatsos, M. (2021). Global extreme poverty: Present and past since 1820. In van Zanden, Rijpma, Malinowski and Mira d’Ercole (eds.) How Was Life? Volume II: New Perspectives on Well-Being and Global Inequality since 1820. Available from the OECD here .

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Children play outside a metal polishing work-shop in Uttar Pradesh, India.

Ending Poverty

The COVID-19 pandemic has caused an increase in the number of people living in extreme poverty, for the first time in a generation. Progress in important areas, such as childhood vaccination and income equality between countries has been reversed, which has not happened in the past three decades. If the current trend continues, it is projected that by 2030, a shocking 575 million people will still be living in extreme poverty, and 84 million children will not be able to attend school. It is estimated that it will take almost 300 years to eliminate discriminatory laws, end child marriage and close gender gaps in legal protection. In 2020, with 71 million more people living in extreme poverty than the year before, the COVID-19 crisis caused the biggest setback in global poverty reduction in decades.

In 2020, with 71 million more people living in extreme poverty than the year before, the COVID-19 crisis caused the biggest setback in global poverty reduction in decades. In April 2020, the United Nations issued a framework for the immediate socio-economic response to COVID-19 and created the Secretary-General's UN COVID-19 Response and Recovery Fund .

From 1990 to 2014, the world made remarkable progress in reducing extreme poverty, with over one billion people moving out of that condition. The global poverty rate decreased by an average of 1.1 percentage points each year, from 37.8 percent to 11.2 percent in 2014. However, between 2014 and 2019, the pace of poverty reduction slowed to 0.6 percentage points per year, which is the slowest rate seen in the past three decades. Within the 24-year period, most of the poverty reduction was observed in East Asia and the Pacific, as well as South Asia.

What is Poverty?

Poverty entails more than the lack of income and productive resources to ensure sustainable livelihoods. Its manifestations include hunger and malnutrition, limited access to education and other basic services, social discrimination and exclusion, as well as the lack of participation in decision-making. In 2015, more than 736 million people lived below the international poverty line. Around 10 per cent of the world population (pre-pandemic) was living in extreme poverty and struggling to fulfil the most basic needs like health, education, and access to water and sanitation, to name a few. There were 122 women aged 25 to 34 living in poverty for every 100 men of the same age group, and more than 160 million children were at risk of continuing to live in extreme poverty by 2030.

Poverty facts and figures

According to the most recent estimates, in 2023 almost 700 million people around the world were subsisting on less than $2.15.
The share of the world’s workers living in extreme poverty fell by half over the last decade: from 14.3 per cent in 2010 to 7.1 per cent in 2019. However, in 2020 it rose for the first time in two decades after the COVID-19 pandemic.
It is projected that the global goal of ending extreme poverty by 2030 will not be achieved , with almost 600 million people still living in extreme poverty.
One out of six children lives in extreme poverty . Between 2013 and 2022, the number of children living on less than US$2.15 a day decreased from 383 million to 333 million, but the economic impact of COVID-19 led to three lost years of progress.
In 2021, 53 per cent of the world’s population – 4.1 billion people – did not benefit from any form of social protection .

Poverty and the Sustainable Development Goals

Ending poverty in all its forms is the first of the 17 Sustainable Development Goals (SDGs) of the 2030 Agenda for Sustainable Development .

The SDGs’ main reference to combatting poverty is made in target 1.A : “Ensure significant mobilization of resources from a variety of sources, including through enhanced development cooperation, in order to provide adequate and predictable means for developing countries, in particular least developed countries, to implement programmes and policies to end poverty in all its dimensions.”

The SDGs also aim to create sound policy frameworks at national and regional levels, based on pro-poor and gender-sensitive development strategies to ensure that by 2030 all men and women have equal rights to economic resources, as well as access to basic services, ownership and control over land and other forms of property, inheritance, natural resources, appropriate new technology and financial services, including microfinance.

Measuring Poverty

There has been marked progress in reducing poverty over the past decades. In 2015, 10 per cent of the world’s population lived at or below $1.90 a day -down from 16 per cent in 2010 and 36 per cent in 1990- while in 2023 almost 700 million people around the world were subsisting on less than $2.15.

At current rates of progress, the world will likely not meet the global goal of ending extreme poverty by 2030 , with estimates indicating that nearly 600 million people will still be struggling with extreme poverty then.

Extreme poverty is concentrated in places where it will be hardest to eradicate— among the least developed countries, in conflict-affected areas, and in remote, rural areas. The outlook is also grim for the nearly 50 percent of the world’s population who live on less than $6.85 a day – the measure used for upper-middle-income countries.

Global Action

The 2030 Agenda for Sustainable Development promises to leave no one behind and to reach those furthest behind first. Meeting this ambitious development agenda requires visionary policies for sustainable, inclusive, sustained and equitable economic growth, supported by full employment and decent work for all, social integration, declining inequality, rising productivity and a favorable environment. In the 2030 Agenda, Goal 1 recognizes that ending poverty in all its forms everywhere is the greatest global challenge facing the world today and an indispensable requirement for sustainable development.

While progress in eradicating extreme poverty has been incremental and widespread, the persistence of poverty, including extreme poverty remains a major concern in Africa, the least developed countries, small island developing States, in some middle-income countries, and countries in situations of conflict and post-conflict countries. In light of these concerns, the General Assembly, at its seventy-second session, decided to proclaim the Third United Nations Decade for the Eradication of Poverty (2018–2027). The objective of the Third Decade is to maintain the momentum generated by the implementation of the Second United Nations Decade for the Eradication of Poverty (2008-2017) towards poverty eradication. Further, the 3rd Decade is also expected to support, in an efficient and coordinated manner, the internationally agreed development goals related to poverty eradication, including the Sustainable Development Goals.

Department of Economic and Social Affairs (DESA)

In 1995, the World Summit for Social Development held in Copenhagen, identified three core issues: poverty eradication, employment generation and social integration, in contributing to the creation of an international community that enables the building of secure, just, free and harmonious societies offering opportunities and higher standards of living for all.

Within the United Nations system , the Division for Social Policy and Development (DSPD) of the Department of Economic and Social Affairs (DESA) acts as Focal Point for the United Nations Decade for the Eradication of Poverty and undertakes activities that assist and facilitate governments in more effective implementation of the commitments and policies adopted in the Copenhagen Declaration on Social Development and the further initiatives on Social Development adopted at the 24th Special session of the General Assembly.

A potential game-changer in accelerating SDG progress

At the 2023 SDG Summit held at the UN’s headquarters in New York, the General Assembly adopted a political declaration to accelerate action to achieve the 17 Sustainable Development Goals (SDG). The document aims to drive economic prosperity and well-being for all people while protecting the environment. In addition, it includes a commitment to financing for developing countries and supports the proposal of an SDG Stimulus of at least $500 billion annually, as well as an effective debt-relief mechanism.

International Day for the Eradication of Poverty

Through resolution 47/196 adopted on 22 December 1992, the General Assembly declared 17 October as the International Day for the Eradication of Poverty .

The observance of the International Day for the Eradication of Poverty can be traced back to 17 October 1987. On that day, over a hundred thousand people gathered at the Trocadéro in Paris, where the Universal Declaration of Human Rights was signed in 1948, to honour the victims of extreme poverty, violence and hunger. They proclaimed that poverty is a violation of human rights and affirmed the need to come together to ensure that these rights are respected. These convictions are inscribed on a commemorative stone unveiled that day. Since then, people of all backgrounds, beliefs and social origins have gathered every year on October 17th to renew their commitment and show their solidarity with the poor.

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The Top 9 Causes of Global Poverty

More than 10% of the world’s population lives in extreme poverty — but do you know why? We look at 9 of the top drivers of global poverty.

Picture it: you need to feed your family, travel to and from work, and get your child school supplies. But you only have $1.90 in your pocket. It seems like an impossible scenario. But for approximately 800 million people in the world, it’s their reality. 11% of the world’s population is living in extreme poverty , which is defined as surviving on only $1.90 a day .

As dire as those figures are, there is some good news: In 1990, 35% of the world (1.8 billion people) was living in extreme poverty — so we’ve made some huge strides. While many argue that we will never be able to truly get rid of poverty, extreme poverty can be eradicated. Unfortunately, there is no “magic bullet” solution, but if we want to get rid of extreme poverty, we must first understand its causes. Here, we look at some of the top causes of poverty around the world.

1. INADEQUATE ACCESS TO CLEAN WATER AND NUTRITIOUS FOOD

Currently, more than 2 billion people don’t have access to clean water at home, while over 800 million suffer from hunger. You might think that poverty causes hunger and prevents people from accessing clean water (and you would be right!), but hunger and water insecurity are also big reasons why people struggle to escape extreme poverty.

If a person doesn’t get enough food, they simply don’t have the strength and energy needed to work. Lack of access to food and clean water can also lead to preventable illnesses like diarrhea. And when people must travel far distances to clinics or spend what little money remains on medicine, it drains already vulnerable populations of money and assets, and can knock a family from poverty into extreme poverty.

Even if clean water sources are available, they’re often located far from poor, rural communities. This means that women and girls collectively spend some 200 million hours every day walking long distances to fetch water. That’s precious time that could be used working or getting an education to help secure a job later in life.

2. LITTLE OR NO ACCESS TO LIVELIHOODS OR JOBS

This might seem a bit like a “no brainer.” Without a job or a way to make money, people will face poverty. But it’s easy to assume that if someone wants a job, they could have one. That just isn’t true, particularly in developing and rural parts of the world. Dwindling access to productive land (often due to conflict, overpopulation, or climate change), and overexploitation of resources like fish or minerals is putting increasing pressure on many traditional livelihoods. In the Democratic Republic of Congo (DRC) for example, most of the population lives in rural communities where natural resources have been plundered over centuries of colonialism — while conflict over land disputes has forced people from the land they relied upon for food and money. Now, more than half of the country lives in extreme poverty. While inconsistent work and low paying jobs can land a family in poverty, absolutely no work means that a family can’t get by without assistance.

3. CONFLICT

Conflict can cause poverty in several ways. Large scale, protracted violence that we see in places like Syria can grind society to a halt, destroy infrastructure, and cause people to flee, forcing families to sell or leave behind all their assets. In Syria, around 70% of the entire population now lives below the poverty line — this in a country where extreme poverty was once very rare. Women often bear the brunt of conflict : during periods of violence, female-headed households become very common. And because women often have difficulty getting well-paying work and are typically excluded from community decision-making, their families are particularly vulnerable.

But even small bouts of violence can have huge impacts on communities that are already struggling. For example, if farmers are worried about their crops being stolen, they won’t invest in planting. Women are particularly vulnerable in these kinds of conflicts, too, as they often become the targets of sexual violence while fetching water or working alone in the fields.

4. INEQUALITY

There are many different types of inequality in the world, from economic to social inequalities like gender, caste systems, or tribal affiliations. But no matter the inequality, it generally means the same thing: unequal or no access to the resources needed to keep or lift a family out of poverty.

Sometimes inequalities are obvious, but in other situations, it can be subtle — for example, the voices of certain people or groups might not be heard in community meetings, meaning they don’t get a say in important decisions. Regardless, these inequalities mean that the people affected don’t have the tools they desperately need to get ahead, and for already vulnerable families, this can mean the difference between being poor or living in extreme poverty.

5. POOR EDUCATION

Not every person without an education is living in extreme poverty. But most of the extremely poor don’t have an education. And why is that? There’s a lot of barriers stopping children from going to school. Many families can’t afford to send their children to school and need them to work. More still don’t see a benefit in educating girls . Education is often referred to as the great equalizer, and that’s because education can open the door to jobs and other resources and skills that a family needs to not just survive but thrive. UNESCO estimates that 171 million people could be lifted out of extreme poverty if they left school with basic reading skills. And, with even more education, world poverty could be cut in half .

6. CLIMATE CHANGE

You might be stunned to learn that the World Bank estimates that climate change has the power to push more than 100 million people into poverty over the next ten years. As it is, climate events like drought, flooding, and severe storms disproportionately impact communities already living in poverty. Why? Because many of the world’s poorest populations rely on farming or hunting and gathering to eat and earn a living. They often have only just enough food and assets to last through the next season, and not enough reserves to fall back on in the event of a poor harvest. So when natural disasters (including the widespread droughts caused by El Niño ) leave millions of people without food, it pushes them further into poverty, and can make recovery even more difficult.

7. LACK OF INFRASTRUCTURE

Imagine that you have to go to work, or to the store, but there are no roads to get you there. Or heavy rains have flooded your route and made it impassable. What would you do then? A lack of infrastructure — from roads, bridges, and wells to cables for light, cell phones, and internet — can isolate communities living in rural areas. Living “ off the grid ” means the inability to go to school, work, or market to buy and sell goods. Traveling farther distances to access basic services not only takes time, it costs money, keeping families in poverty. Isolation limits opportunity, and without opportunity, many find it difficult, if not impossible, to escape extreme poverty.

8. LIMITED CAPACITY OF THE GOVERNMENT

Many people living in the United States are familiar with social welfare programs that people can access if they need healthcare or food assistance. But not every government can provide this type of help to its citizens — and without that safety net, there’s nothing to stop vulnerable families from backsliding further into extreme poverty if something goes wrong. Ineffective governments also contribute to several of the other causes of extreme poverty mentioned above, as they are unable to provide necessary infrastructure or ensure the safety and security of their citizens in the event of conflict.

9. LACK OF RESERVES

People living in poverty don’t have the means to weather the storms of life. So when there is a drought, or conflict, or illness, there is little money saved or assets on hand to help. In Ethiopia for example, repeated cycles of drought have caused harvest after harvest to fail, causing a widespread hunger crisis. To cope, families will pull their children from school, and sell off everything they own to eat. That can help a family make it through one bad season, but not another. For communities constantly facing climate extremes or prolonged conflict, the repeated shocks can send a family reeling into extreme poverty and prevent them from ever recovering.

This blog was originally published at www.concernusa.org

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What Causes Poverty in the World Report (Assessment)

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Poverty Rates in the World

Overpopulation and world poverty, culture and world poverty, global distribution of resources: historical injustices and poverty in nations, education and unemployment, environmental degradation, inflation and development approaches, works cited.

This essay discusses the causes of poverty in the world. Poverty and related social inequality are as old as human history. Over the years, people have postulated many causes of poverty and social inequality. The many causes of poverty not withstanding, many definitions of the phenomena have been established. Whichever the definition, poverty is associated with want, lack of or deprivation of necessities in life. According to World Bank, people are individuals who survive on less than a dollar per day.

Despite the fact that living below a dollar, especially in urban areas, is an indicator of being poor, this definition does not apply in given contexts. For people living in some rural areas, the value of what they use as per their market pricing is lower than a dollar. However, considering the quality of life they live, they are better off than many others who live on more than ten dollars a day in the big cities of the world. Therefore, poverty is a complex concept and highly relative in its application or misapplication.

The world of today has the many people living in better socio-economic conditions than a century ago. However, the divide between the rich has widened over the years with the poor in the world forming an overwhelming majority. Statistics indicate that Africa carries the bulk of the poor in the world.

However, even in highly developing nations like India and China, given regions are notably highly impoverished. The impoverished regions of the world are characterized by dilapidated housing, lack of access to education, health care, frequent famines and other humanitarian disasters and catastrophes.

Due to poor infrastructure, response to problems is not efficient and effective enough thus resultant high impacts of disasters that would otherwise be averted. To understand this point better, one has to consider how a natural disaster like a tsunami of say Katrina’s magnitude would affect a third world country. The effects would be high due to poor response unlike what actually happened in the USA.

One of the major factors that have contributed to poverty in given areas of the world is overpopulation (Jones 137). The condition of having many people with fewer available resources combined with little space inevitably results in poverty. Uncontrolled birth rates, in places like Africa, have resulted in a general population boom.

The population upsurge has continually exerted pressure on available resources in the world. The available resource in given countries can only support a given number of people (McCarthy 42). One of the critical resources that support mankind is farming. A majority of people around the world depend on farming or general agriculture for sustenance. Population upsurge and resultant splitting of land into smaller pieces has led to less food production.

Culture is one of the reasons why people remain glued to practices that perpetuate poverty. For example, in some developing countries the more children one has the higher he or she is regarded in society. Cultural practices in traditional rural communities usually sanction the ability of large members of the family (Baker 154).

The governments of most third world countries give little or no attention to family planning because it goes against the cultural assumptions of the people. People anticipating to have smaller families experience difficulty in realizing this as others consider them weird (Rohr 105). Surging population rates point to even higher poverty rates in developing countries (Rohr 149).

Some thinkers have attributed poverty in some parts of the world to unequal distribution of resources. The legacy of colonialism is largely blamed for unequal resource distribution in the world economy (Baker 1).

Most of the developing countries have put more efforts to develop and strengthen their economies with technology and industries but this has been unsuccessful. The inequality in world economy due to historical events has largely hampered poverty alleviation efforts in the world (Pogge 17). Colonialists, for example, left Africa with a very weak infrastructure i.e. transport systems, power generation and communication after bludgeoning the resources of the colonies.

These happenings have derailed all aspects of moving away from poverty because the infrastructure is critical in the development of industries and expansion of the economy (Pogge 123). In recent years, wealthier countries have been accused of neocolonialism i.e. economic based dominance. This influence has enabled the wealthier countries to acquire inexpensive resources such as oil, ores and mineral from poor countries (Fields 59).

Lack of educational opportunities hampers development especially of children from rural areas (Baker 26). For the educated, lack of employment opportunities denies them an opportunity for social mobility. The rural areas in most countries of the world have high rates of illiteracy.

Illiteracy has been more severe in developing countries especially Africa south of the Sahara. Governments of poor countries have faced the inability to provide good and efficient public schools thus not marching with developments in the developing countries. Without good and sound education people fail to find a meaningful income.

Most poor people, in rural areas, forego going to school to facilitate concentration on how to make a minimal living (Iceland 79). Developing countries provide minimal employment opportunities, especially for women, which dampens the youth’s morale of going to school. When people do not work, there is no money which is earned and thus this increases high unemployment rate which in turn increases the level of poverty (Gilbert 131).

Environmental degradation in many parts of the world has led to the increase of poverty in the world. The world natural resources, which support mankind and enable growth and development, are slowly getting depleted due to unsustainable usage.

The climatic conditions have been changing gradually and natural habitats have slowly but surely been severely changed (Fields 167). Water bodies, atmosphere, forests and soils have deteriorated and this is a major cause of increasing world poverty. Global environmental degradation has led to the phenomenon of global warming.

Weather conditions are no longer steady but rather erratic and unpredictable. Over use of fertilizers and other wrong use of land has highly affected crop yield. Intensive farming or land over use, for instance, has lead to soil infertility and decrease in crop production (Fields 218).

Pollution from industries such as power production, mining, automobiles, agricultural fertilizers and chemical production has adversely affected adequate food production, availability of clean water for drinking, and facilitated destruction of natural habitats especially for aquatic beings.

Deforestation has brought environmental effects especially in developing countries where some sections of the population depend entirely on forests as source of food and wood to power their activities. Their survival efforts have largely contributed to deforestation and its related effects (Fields 225). Forests absorb pollutant and offers catchment area for water. Without forests, the rain cycle is affected leading to increased famines in the world.

Poverty in the world is linked to economic trends. Developed countries, such as the United States in the 1950s, experienced high income growth (Dudley 167). Most families doubled their income within this period. However, in 1970s and early 1990s, inflation grew steadily hence raising the cost of living.

The economic recession of the 1980s adversely affected families; the young and less educated people could not get well paying jobs to support themselves. The change of labor market in most developed countries has also further aggravated the situation of poverty in the world today (Dudley 215).

The number of well paying jobs in the manufacturing industries has declined whereas in the service and technology industries, workers have significantly increased. Most people who cannot afford college education experiences hardship in securing a well paying work hence they are locked out of social mobility.

Moreover, in most wealthy countries, many people living in poverty have increased because of the rising inequality in the way resources are distributed. For instance in the United States, 20% of the poor have got smaller percentage of the total national income whereas the wealthy have increasingly earned much higher national income of 45%.

During this period, the middle and bottom income distribution has been progressively worse as the cost of living has gone up (Kendall 67). Demographic shifts have contributed to poverty especially among the children. In the US for example, family structures have been altered significantly increasing single parenting. This has increased poverty in the world (Kendall 73).

Poverty levels have been soaring around the world despite improved economic fortunes for a minority. The major causes of world poverty are improper policies and development approaches or plans undertaken in different nations. Economic imbalance or inequalities resulting from historical injustices also maintain a world order that does not sustain all. To alleviate world poverty, issues like overpopulation, environmental degradation among other factors have to be looked into more closely.

Baker, Judy, L. Poverty Reduction and Human Development in the Caribbean: a cross- country study, Parts 63-366 . Washington: World Bank Publication.1997

Fields, Gary, S. Poverty, Inequality, and Development . Florida: CUP Archive. 1980

Gilbert, Geoffrey. World poverty: a Reference handbook, Contemporary world issues. California: ABC-CLIO. 2004

Iceland, John. Poverty in America: a handbook . California: University of California Press. 2006

Jones, Philip, W. Education, Poverty and the World Bank . New Jersey: Sense Publishers. 2006

Kendall, Diana. Sociology in Our Times . Connecticut: Cengage Learning, 2007

McCarthy, Callaghan. The Causes of Poverty . East Yorkshire: P. S. King & Son, 1908

Pogge, Thomas, Winfried, Menko. World Poverty and Human Rights: Cosmopolitan Responsibilities and Reforms . Cambridge: Polity, 2008

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Urban Slum in the "City of God" (2002)
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IvyPanda. (2018, July 10). What Causes Poverty in the World. https://ivypanda.com/essays/what-causes-poverty-in-the-world/

"What Causes Poverty in the World." IvyPanda , 10 July 2018, ivypanda.com/essays/what-causes-poverty-in-the-world/.

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IvyPanda . 2018. "What Causes Poverty in the World." July 10, 2018. https://ivypanda.com/essays/what-causes-poverty-in-the-world/.

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What are the Causes of Poverty?

Most analysts would agree that there is no single root cause of all poverty everywhere throughout human history. However, even taking into account the individual histories and circumstances of particular countries and regions, there are significant trends in the causes of poverty.

Top 5 Causes of Poverty

History Many of the poorest nations in the world were former colonies from which slaves and resources had been systematically extracted for the benefit of colonizing countries. Although there are notable exceptions (Australia, Canada and the U.S. being perhaps the most prominent), for most of these former colonies, colonialism and its legacies have helped create the conditions that prevent many people from accessing land, capital, education and other resources that allow people to support themselves adequately. In these nations, poverty is one legacy of a troubled history involving conquest.
War & political instability Whatever the causes of war and political upheaval, it is clear that safety, stability and security are essential for subsistence and, beyond that, economic prosperity and growth. Without these basics, natural resources cannot be harnessed individually or collectively, and no amount of education, talent or technological know-how will allow people to work and reap the benefits of their labor. Laws are needed to protect rights, property and investments, and without legal protections, farmers, would-be entrepreneurs and business owners cannot safely invest in a country’s economy. It is a telling sign that the poorest countries in the world have all experienced civil war and serious political upheaval at some point in the 20th century, and many of them have weak governments that cannot or do not protect people against violence.
National Debt Many poor countries carry significant debt due to loans from wealthier nations and international financial institutions. Poorer nations owe an average of $2.30 in debt for every $1 received in grant aid. In addition, structural adjustment policies by organizations like the World Bank and the International Monetary Fund often require poorer nations to open their markets to outside business and investors, thereby increasing competition with local businesses and, many argue, undermining the potential development of local economies. In recent years, calls for debt reduction and forgiveness have been increasing, as activists see this as a key means of reducing poverty. The United Nations has also made it a priority to examine how economic structural adjustment policies can be designed to place less pressure on vulnerable populations.
Discrimination and social inequality Poverty and inequality are two different things, but inequality can feed widespread poverty by barring groups with lower social status from accessing the tools and resources to support themselves. According to the United Nations Social Policy and Development Division, “inequalities in income distribution and access to productive resources, basic social services, opportunities, markets, and information have been on the rise worldwide, often causing and exacerbating poverty.” The U.N. and many aid groups also point out that gender discrimination has been a significant factor in holding many women and children around the world in poverty.
Vulnerability to natural disasters In regions of the world that are already less wealthy, recurrent or occasional catastrophic natural disasters can pose a significant obstacle to eradicating poverty. The effects of flooding in Bangladesh, drought in the Horn of Africa and the 2005 earthquake in Haiti are examples of the ways in which vulnerability to natural disasters can be devastating to affected countries. In each of these cases, already impoverished people became refugees within their own countries, losing whatever little they had, being forced out of their living spaces and becoming almost completely dependent on others for survival. According to the World Bank, two years after Cyclone Nargis hit Myanmar in 2008, the debt burden of local fishermen had doubled. The Solomon Islands experienced an earthquake and tsunami in 2007 and the losses from that disaster equaled 95 percent of the national budget. Without foreign aid , governments in these countries would have been unable to meet the needs of their people.

These are only five causes of poverty. They are both external and internal causes; both man-made and natural. Just as there is no single cause of poverty, there is no single solution. Nevertheless, understanding the ways in which complex forces like these interact to create and sustain the conditions of widespread global poverty is a vital step toward combating poverty around the world.

– Délice Williams

Source: Global Issues, USCCB, World Bank

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Causes of Poverty

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This page last updated Sunday, September 28, 2014
This page: https://www.globalissues.org/issue/2/causes-of-poverty .
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Almost half the world — over 3 billion people — live on less than $2.50 a day. The GDP (Gross Domestic Product) of the 41 Heavily Indebted Poor Countries (567 million people) is less than the wealth of the world’s 7 richest people combined. Nearly a billion people entered the 21st century unable to read a book or sign their names. Less than one per cent of what the world spent every year on weapons was needed to put every child into school by the year 2000 and yet it didn’t happen. 1 billion children live in poverty (1 in 2 children in the world). 640 million live without adequate shelter, 400 million have no access to safe water, 270 million have no access to health services. 10.6 million died in 2003 before they reached the age of 5 (or roughly 29,000 children per day).

Poverty is the state for the majority of the world’s people and nations. Why is this? Is it enough to blame poor people for their own predicament? Have they been lazy, made poor decisions, and been solely responsible for their plight? What about their governments? Have they pursued policies that actually harm successful development? Such causes of poverty and inequality are no doubt real. But deeper and more global causes of poverty are often less discussed.

Behind the increasing interconnectedness promised by globalization are global decisions, policies, and practices. These are typically influenced, driven, or formulated by the rich and powerful. These can be leaders of rich countries or other global actors such as multinational corporations, institutions, and influential people.

In the face of such enormous external influence, the governments of poor nations and their people are often powerless. As a result, in the global context, a few get wealthy while the majority struggle.

These next few articles and sections explore various poverty issues in more depth:

14 articles on “Causes of Poverty” and 6 related issues:

Poverty Facts and Stats

Most of humanity lives on just a few dollars a day. Whether you live in the wealthiest nations in the world or the poorest, you will see high levels of inequality.

80% of the world population lived on less than $10 a day in 2005

The poorest people will also have less access to health, education and other services. Problems of hunger, malnutrition and disease afflict the poorest in society. The poorest are also typically marginalized from society and have little representation or voice in public and political debates, making it even harder to escape poverty.

By contrast, the wealthier you are, the more likely you are to benefit from economic or political policies. The amount the world spends on military, financial bailouts and other areas that benefit the wealthy, compared to the amount spent to address the daily crisis of poverty and related problems are often staggering.

Some facts and figures on poverty presented in this page are eye-openers, to say the least.

Read “ Poverty Facts and Stats ” to learn more.

Structural Adjustment—a Major Cause of Poverty

Cutbacks in health, education and other vital social services around the world have resulted from structural adjustment policies prescribed by the International Monetary Fund (IMF) and the World Bank as conditions for loans and repayment. In addition, developing nation governments are required to open their economies to compete with each other and with more powerful and established industrialized nations. To attract investment, poor countries enter a spiraling race to the bottom to see who can provide lower standards, reduced wages and cheaper resources. This has increased poverty and inequality for most people. It also forms a backbone to what we today call globalization. As a result, it maintains the historic unequal rules of trade.

The International Monetary Fund (IMF) and World Bank-prescribed structural adjustment policies have meant that nations are lent money on condition that they cut social expenditure (such as health and education) in order to repay the loans. Many are tied to opening up their economies and being primarily commodity exporters in such a way that poor countries have found themselves in a spiraling race to the bottom as each nation competes against others to provide lower standards, reduced wages and cheaper resources to corporations and richer nations. This has increased poverty and dependency for most people. It also forms a backbone to what we today call globalization. As a result, it maintains the historic unequal rules of trade.

Read “ Structural Adjustment—a Major Cause of Poverty ” to learn more.

Poverty Around The World

In most nations today, inequality—the gap between the rich and the poor—is quite high and often widening.

The causes are numerous, including a lack of individual responsibility, bad government policy, exploitation by people and businesses with power and influence, or some combination of these and other factors.

Many feel that high levels of inequality will affect social cohesion and lead to problems such as increasing crime and violence.

Inequality is often a measure of relative poverty. Absolute poverty, however, is also a concern. World Bank figures for world poverty reveals a higher number of people live in poverty than previously thought.

For example, the new poverty line is defined as living on the equivalent of $1.25 a day. With that measure based on latest data available (2005), 1.4 billion people live on or below that line.

Furthermore, almost half the world—over three billion people—live on less than $2.50 a day and at least 80% of humanity lives on less than $10 a day:

Read “ Poverty Around The World ” to learn more.

Today, around 21,000 children died around the world

Images © UNICEF

Around 21,000 children die every day around the world.

That is equivalent to:

1 child dying every 4 seconds
14 children dying every minute
A 2011 Libya conflict-scale death toll every day
A 2010 Haiti earthquake occurring every 10 days
A 2004 Asian Tsunami occurring every 11 days
An Iraq-scale death toll every 19–46 days
Just under 7.6 million children dying every year
Some 92 million children dying between 2000 and 2010

The silent killers are poverty, easily preventable diseases and illnesses, and other related causes. Despite the scale of this daily/ongoing catastrophe, it rarely manages to achieve, much less sustain, prime-time, headline coverage.

Read “ Today, around 21,000 children died around the world ” to learn more.

World Hunger and Poverty

Meaningful long-term alleviation of hunger is rooted in the alleviation of poverty, as poverty leads to hunger. World hunger is a terrible symptom of world poverty. If efforts are only directed at providing food, or improving food production or distribution, then the structural root causes that create hunger, poverty and dependency would still remain. While resources and energies are deployed to relieve hunger through technical measures such as improving agriculture, and as important as these are, inter-related issues such as poverty means that political solutions are likely required as well for meaningful and long term hunger alleviation.

Read “ World Hunger and Poverty ” to learn more.

Food Dumping [Aid] Maintains Poverty

Food aid (when not for emergency relief) can actually be very destructive on the economy of the recipient nation and contribute to more hunger and poverty in the long term. Free, subsidized, or cheap food, below market prices undercuts local farmers, who cannot compete and are driven out of jobs and into poverty, further slanting the market share of the larger producers such as those from the US and Europe. Many poor nations are dependent on farming, and so such food aid amounts to food dumping. In the past few decades, more powerful nations have used this as a foreign policy tool for dominance rather than for real aid.

Read “ Food Dumping [Aid] Maintains Poverty ” to learn more.

Food and Agriculture Issues

This issue explores topics ranging from the global food crisis of 2008, to issues of food aid, world hunger, food dumping and wasteful agriculture such as growing tobacco, sugar, beef, and more.

Read “ Food and Agriculture Issues ” to learn more.

Trade, Economy, & Related Issues

Read “ Trade, Economy, & Related Issues ” to learn more.

While that definitely needs to happen, the rich countries themselves are often active in the largest forms of corruption in those poor countries, and many economic policies they prescribe have exacerbated the problem.

Corruption in developing countries definitely must be high on the priority lists (and is increasingly becoming so in the wake of the global financial crisis), but so too must it be on the priority lists of rich countries.

Read “ Corruption ” to learn more.

Tax Avoidance and Tax Havens; Undermining Democracy

Some tax avoidance, regardless of how morally objectionable it may be to some people, is perfectly legal, and the global super elite are able to hide away trillions of dollars, resulting in massive losses of tax revenues for cash-strapped governments who then burden ordinary citizens further with austerity measures during economic crisis, for example. Yet these super elite are often very influential in politics and business. In effect, they are able to undermine democracy and capitalism at the same time.

As the global financial crisis has affected many countries, tackling tax avoidance would help target those more likely to have contributed to the problem while avoid many unnecessary austerity measures that hit the poorest so hard. But despite rhetoric stating otherwise, it does not seem to high on the agenda of many governments as you might think.

Read “ Tax Avoidance and Tax Havens; Undermining Democracy ” to learn more.

Foreign Aid for Development Assistance

In 1970, the world’s rich countries agreed to give 0.7% of their gross national income as official international development aid, annually.

Since that time, billions have certainly been given each year, but rarely have the rich nations actually met their promised target.

For example, the US is often the largest donor in dollar terms, but ranks amongst the lowest in terms of meeting the stated 0.7% target.

Furthermore, aid has often come with a price of its own for the developing nations. Common criticisms, for many years, of foreign aid, have included the following:

Aid is often wasted on conditions that the recipient must use overpriced goods and services from donor countries
Most aid does not actually go to the poorest who would need it the most
Aid amounts are dwarfed by rich country protectionism that denies market access for poor country products while rich nations use aid as a lever to open poor country markets to their products
Large projects or massive grand strategies often fail to help the vulnerable; money can often be embezzled away.

This article explores who has benefited most from this aid, the recipients or the donors.

Read “ Foreign Aid for Development Assistance ” to learn more.

Causes of Hunger are related to Poverty

There are many inter-related issues causing hunger, which are related to economics and other factors that cause poverty. They include land rights and ownership, diversion of land use to non-productive use, increasing emphasis on export-oriented agriculture, inefficient agricultural practices, war, famine, drought, over-fishing, poor crop yields, etc. This section introduces some of these issues.

Read “ Causes of Hunger are related to Poverty ” to learn more.

United Nations World Summit 2005

The UN World Summit for September 2005 is supposed to review progress since the Millennium Declaration, adopted by all Member States in 2000. However, the US has proposed enormous changes to an outcome document that is to be signed by all members. There are changes on almost all accounts, including striking any mention of the Millennium Development Goals, that aim for example, to halve poverty and world hunger by 2015. This has led to concerns that the outcome document will be weakened. Developing countries are also worried about stronger text on human rights and about giving the UN Security Council more powers.

Read “ United Nations World Summit 2005 ” to learn more.

IMF & World Bank Protests, Washington D.C.

To complement the public protests in Seattle, the week leading up to April 16th/17th 2000 saw the other two global institutions, the International Monetary Fund (IMF) and World Bank, as the focus of renewed protests and criticisms in Washington, D.C. The purpose of the mass demonstrations was to protest against the current form of globalization, which is seen as unaccountable, corporate-led, and non-democratic, and to show the link between poverty and the various policies of the IMF and the World Bank.

Read “ IMF & World Bank Protests, Washington D.C. ” to learn more.

Economic Democracy

This next page is a reposting of a flyer about a new book from J.W. Smith and the Institute for Economic Democracy, whom I thank for their kind permission. The book is called Economic Democracy: The Political Struggle Of The 21st Century. Typically on this site, I do not advertise books etc, (although I will cite from and link to some, where relevant). However, in this case, I found that the text in the flyer provides an excellent summary of poverty's historic roots, as well as of the multitude of issues that cause poverty. (Please also note that I do not make any proceeds from the sale of this book in any way.)

Read “ Economic Democracy ” to learn more.

Poverty Links for More Information

Links to other sites discussion issues on trade, the global economy, poverty and other related issues.

Read “ Poverty Links for More Information ” to learn more.

Trade, Economic Links For More Information

Read “ Trade, Economic Links For More Information ” to learn more.

World hunger related links for more information

Links to web sites and articles that discuss world hunger, the relationship between populations and hunger, of poverty and hunger, agricultural issues, land rights and so on.

Read “ World hunger related links for more information ” to learn more.

Sustainable Development

Read “ Sustainable Development ” to learn more.

Read “ Aid ” to learn more.

Author and Page Information

Created: Monday, July 20, 1998
Last updated: Sunday, September 28, 2014

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An Untapped Instrument in the Fight Against Poverty: The Impacts of Financial Literacy on Poverty Worldwide

Original Research
Open access
Published: 07 August 2024

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Ngoc Duc Lang 1 ,
Ha Mai Tran 1 ,
Giang Tra Nguyen 3 &
Duc Hong Vo 1 , 2

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The World Bank assessed that meeting the goal of eradicating extreme poverty by 2030 appears to be challenging (or even impossible) for the world. This observation requires an urgent need for policymakers to explore potent instruments to combat poverty globally. Numerous studies have examined various determinants of poverty. However, financial literacy—a relatively new concept—remains underexplored, especially on a global scale. As such, this study is conducted to assess whether financial literacy can reduce the likelihood of falling into poverty using a unique dataset of 113 countries. We find that financial literacy has a significant and negative association with the likelihood of falling into poverty. Beyond association, the causal analysis shows that financial literacy exerts a negative effect on poverty. Our findings remain largely unchanged across different sub-samples based on socio-demographic factors, regions and country income levels, and robustness analyses.

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1 Introduction

In the vast landscape of societal challenges, few issues resonate as profoundly as poverty. Its far-reaching implications permeate every facet of human life, from education attainment and health outcomes to economic development, political stability, and social mobility. According to the World Bank, around 9.2 per cent of the global population lived in extreme poverty in 2020, defined as living on less than $1.90 per day. The COVID-19 pandemic has further exacerbated poverty rates, with an estimated 120 million and 150 million people pushed into extreme poverty in 2020 and 2021, respectively (World Bank, 2020a ). Knowing that the $1.90 per day international poverty line may be too low to determine people experiencing poverty in middle-income countries, the World Bank adjusted this line to $3.20 and $5.50 for lower-middle-income and upper-middle-income countries. Based on these poverty lines, nearly one-fourth of the global population lives below the $3.20 threshold, while over 40% of the world’s population, nearly 3.3 billion individuals, live below the $5.50 benchmark (World Bank, 2020b ). The World Bank even stated that achieving the goal of eradicating extreme poverty by 2030 seems hard to meet (Reuters, 2022 ). These facts show that poverty is still a considerable challenge in the world.

The topic of poverty, with its inherent challenges and potential for positive impact, beckons researchers to engage in a meaningful exploration that transcends disciplines. Research on this topic is intellectually stimulating and carries profound implications for policymaking, social programs, and the well-being of millions worldwide. By shedding light on the nuances of poverty, researchers have the power to inform transformative interventions, challenge systemic inequalities, and pave the way for a more inclusive and equitable future. Inspired by this, our research aims to explore novel and potent instruments for eliminating poverty on a global scale.

The current literature has documented a wide range of factors associated with poverty reduction, including schooling (Hofmarcher, 2021 ; Zhang, 2014 ), employment and nonfarm employment (Lanjouw, 1999 ; Page & Shimeles, 2015 ; Thompson & Dahling, 2019 ), microfinance and financial inclusion (Koomson et al., 2020a ; Li, 2018 ; Polloni-Silva et al., 2021 ), women empowerment (Tang, 2022 ), energy and renewable energy accessibility (Taghizadeh et al., 2023 ; Zhao et al., 2022 ), infrastructure development (Timilsina et al., 2020 ), health status and healthcare availability (Krishna, 2007 ; Silverman et al., 2016 ; Zhou et al., 2020 ), and others.

In recent years, there is a growing literature on the impact of financial literacy on poverty alleviation. Using the China Household Finance Survey (CHFS) from 2015 to 2017, Xu et al. ( 2023 ) show that financial literacy can effectively and efficiently reduce poverty among rural households in the short and long term. Similarly, financial literacy is also found to have positive impacts on poverty alleviation in Chinese households (Wang et al., 2022 ). Jappelli et al. ( 2014 ) even recognize financial literacy as essential to eradicating poverty. Besides poverty, some studies also provide evidence of the positive effects of financial literacy on income and wealth accumulation, which are closely related to poverty. Adopting a new instrument variable method, Van Rooij et al. ( 2012 ) confirm the positive effect of financial literacy on household wealth in the Netherlands. Sekita et al. ( 2022 ) also find the same result in Japan. Meanwhile, financial illiteracy is a crucial predictor of wealth inequality (Jappelli & Padula, 2013 ; Lusardi et al., 2017 ). In addition, Disney and Gathergood ( 2011 ) indicate that financially literate people have higher household income levels. These studies provide many meaningful insights into poverty reduction and the income and wealth of individuals and households. Unfortunately, the current literature only focuses on a single country, such as China, the Netherlands, and Japan.

Our study contributes to the current literature as follows. First, we are the first to explore whether financial literacy reduces the likelihood of individuals falling into poverty on a global scale. Our analyses confirm that financial literacy significantly and negatively affects poverty worldwide. Second, this is also the first attempt to provide thorough analyses of the relationship between financial literacy and poverty across different socio-demographic groups, regions, and country income levels. The results show that the negative association between financial literacy and poverty remains largely unchanged across different socio-demographic groups, regions, and country income levels, implying that our results can be applicable in various contexts. Last, various robustness checks are conducted to ensure that the impacts of financial literacy are not deviated by reverse causality, omitted variable bias and variation between countries. The coefficients of financial literacy on poverty are still significant and negative across robustness tests, including (i) probit models with Gaussian copula terms (addressing endogeneity concerns), (ii) multilevel probit models (considering variations across countries), and (iii) Rubin’s ( 1974 ) causal model (addressing omitted variable concerns).

Following this introduction, the remainder of this paper can be summarized as follows. Section 2 provides a detailed review of financial literacy and poverty studies. In Sect. 3 , we describe the measures of poverty and the econometric strategy employed in this paper. Section 4 presents the empirical results, while Sect. 5 thoroughly discusses these results. Finally, we conclude and provide policy implications derived from our findings in Sect. 6 .

2 Literature Review

We classify the literature under review into three strands of financial literacy and poverty studies. The first strand deals with the determinants of poverty at the macro level. The second strand is the determinants of poverty at the individual level. The third strand includes findings regarding the impacts of financial literacy.

2.1 Macro-Level Determinants of Poverty

First, the existing literature has documented various country-level factors influencing poverty, including economic growth (Adams, 2004 ; Klasen, 2008 ); trade openness and liberalization (Bhagwati & Srinivasan, 2002 ; Harrison et al., 2003 ; Hertel & Reimer, 2005 ); financial development (Bolarinwa et al., 2021 ; Jeanneney & Kpodar, 2011 ; Perez-Moreno, 2011 ), foreign direct investment (Gohou & Soumaré, 2012 ) the informationization level (James, 2006 ; Mora-Rivera & García-Mora, 2021 ), institutional factors such as political stability, and corruption (Han et al., 2022 ; Tebaldi & Mohan, 2010 ).

2.2 Individual-Level Determinants of Poverty

Regarding the second strand, there is a rich literature on individual-level factors that influence the likelihood of falling into poverty. Using a vast database of 32 European countries, Hofmarcher ( 2021 ) points out substantially and significantly mitigating the effects of education on poverty. Similarly, studies by Zhang ( 2014 ), Ladd ( 2012 ) and Zhang and Zhao ( 2006 ) also confirm that education is positively associated with poverty reduction. The literature also emphasizes the gendered dimensions of poverty that female and female-head households are often at higher risk of falling into and staying in poverty than males (Lewin & Stier, 2018 ; Millar & Glendinning, 1989 ). This phenomenon was noted as the “feminization of poverty”—the growing trend wherein individuals experiencing poverty are predominantly women—by Pearce ( 1990 ). Along with gender, marital status, and the number of children at home can exert significant effects on poverty. Unmarried people are found to be poorer than legally married ones in Mexico (Ortega-Díaz, 2020 ), but a reversed trend is observed in Nigeria (Anyanwu, 2014 ). Herbst-Debby et al. ( 2021 ) show that divorce heightens the likelihood of poverty for women and diminishes this likelihood for men. Nevertheless, for both genders, the combination of divorce and more children at home amplifies the risk of poverty. In contrast, divorce or separation is negatively correlated with the probability of falling into poverty in the study by Anyanwu ( 2014 ). Additionally, the study by Anyanwu ( 2014 ) points out that household size is an important factor influencing poverty. Besides, old age has also been found to be correlated with poverty in many countries (Kwan & Walsh, 2018 ; Lloyd-Sherlock, 2000 ). Lastly, employment and nonfarm employment are effective and efficient in helping people escape from poverty, especially in African countries (Lanjouw, 1999 ; Page & Shimeles, 2015 ; Thompson & Dahling, 2019 ).

2.3 The Impacts of Financial Literacy

Besides, there is a rapidly expanding body of research examining the effects of financial literacy on various aspects of individuals, households, and society. These impacts can be categorized into two main groups: (i) impacts on behaviours and (ii) impacts on financial capacity.

The literature analyzing the impacts of financial literacy on behaviours is elaborated first. Utilizing data from 143 countries worldwide in 2014, Grohmann et al. ( 2018 ) confirm the important role of financial literacy in improving financial inclusion under “all” circumstances. Specifically, financial literacy boosts bank account ownership, savings at a formal financial institution, debit card ownership, and usage among populations in countries with both high and low levels of financial depth. Similarly, studies by Cole et al. ( 2011 ) and Hogarth et al. ( 2005 ) also point out the negative correlation between financial literacy and the number of unbanked adults and inactive account holders. However, Cole and Shastry ( 2009 ) note an exception in the United States, where financial market participation is not influenced by state-mandated financial literacy education. Besides, Cohen and Nelson ( 2011 ) document the positive effects of financial literacy on people's awareness of available financial services and the ability to choose suitable financial services. Additionally, the higher rate of stock participation can be attributed to financial literacy, as it encourages the use of financial instruments such as insurance and credit to protect individuals from unexpected incidents and change household risk attitudes (Urrea & Maldonado, 2011 ; Koomson et al., 2020b ). The positive effects of financial literacy on stock market participation are also confirmed in other studies, such as Almenberg and Dreber ( 2015 ), Van Rooij et al. ( 2011 ) and Christelis et al. ( 2010 ). The causal effects of economic education on stock market participation are even established by Christiansen et al. ( 2008 ). In terms of formal financial inclusion, financial literacy, on the one hand, helps those in need recognize the credit demand and their demand-based credit constraints (Lusardi & Tufano, 2015 ; Sol Murta & Miguel Gama, 2022 ; Stango & Zinman, 2009 ). On the other hand, financial literacy improves their understanding of policies and lending information (Bilal et al., 2021 ). Borrowers have a higher propensity to lend from formal financial institutions instead of from casual relationships such as family and friends or loans from informal lenders (Xu et al., 2020 ). This finding is noted as “increasing household credit access by breaking down the information barrier” by Wang et al. ( 2022 ). These favourable outcomes contribute significantly to the broader positive impact of financial literacy—promoting entrepreneurial behaviours (Ćumurović & Hyll, 2019 ). By addressing household demand for credit and removing credit constraints, financial literacy directly mitigates primary constraints on residents’ entrepreneurial activities (Karaivanov, 2012 ; Weng et al., 2022 ). Similarly, the higher propensity to buy insurance and credit for risk protection, along with better investment opportunities, can also boost households’ willingness to start a business (Bilal et al., 2021 ; Cude et al., 2020 ).

Financial literacy plays a pivotal role in equipping individuals with the essential skills and qualities necessary for undertaking entrepreneurial activities (Oggero et al., 2020 ), including better allocation decisions to different types of assets and better entrepreneurial choices. Additionally, Lusardi and Mitchell ( 2011a . 2011b ) and Bucher-Koenen and Lusardi ( 2011 ) successfully prove the higher propensity to plan for retirement in financially literate individuals. At the same time, Niu et al. ( 2020 ) also discover the ability to build a comprehensive, long-term financial plan for people in this group. Despite the robust impacts of financial literacy on bank accounts and debit card usage, financial literacy’s impacts on savings and wealth accumulation vary in different studies. Karlan et al. ( 2014 ) assert no correlation between higher usages of savings products resulting from higher financial literacy and the increase in users’ net savings (due to the possibility of crowd-out and crowd-in) and/or the improvement in their overall wealth (due to the probability of trade-off between money for savings and money for other activities like borrowing, investment, health, and consumptions). This finding aligns with those reported in the study conducted by Dupas et al. ( 2018 ), which utilizes data from Chile, Malawi, and Uganda. Conversely, Banerjee ( 1992 ) and Hastings et al. ( 2013 ) still find a high correlation between financial illiteracy and low savings.

Besides behaviours, financial literacy also can influence individuals' financial statuses. First, financial literacy significantly contributes to a better financial decision-making process (Evans & Jovanovic, 1989 ; Santos et al., 2022 ). Specifically, a higher level of financial literacy empowers individuals to effectively utilize financial instruments by enabling them to evaluate the value of financial products and make well-informed decisions, such as those related to reverse mortgages (Davidoff et al., 2017 ; Duca & Kumar, 2014 ) and investments (Bucher-Koenen & Ziegelmeyer, 2014 ; Guiso & Viviano, 2015 ; Klapper et al., 2013 ). Moreover, research in Germany (Bucher-Koenen & Lusardi, 2011 ), the Netherlands (Van Rooij et al., 2011 ) and Russia (Klapper & Panos, 2011 ) show that individuals with basic financial understandings are more excel in planning and saving for retirement. Second, for debt management, Lusardi and Tufano ( 2015 ) and Stango and Zinman ( 2009 ) discover a strong relationship between debt literacy and debt load. Debt-illiterate borrowers usually struggle with transacting in high-cost ways (paying fees and borrowing at high interest rates) and end up borrowing more but saving less (Galariotis & Monne, 2023 ). Meanwhile, adults with higher debt literacy are less likely to be over-indebted (Gathergood, 2012 ) and to fall into the trap of fictitious billing and loan guarantee fraud (Kadoya et al., 2021 ). A possible explanation can be that financial literacy practices caution, decreased comfort with debt, and sensitivity to the framing of people (Lusardi & Messy, 2023 ). Financial knowledge can also facilitate the alignment of liabilities with debt obligations, a critical aspect of prudent mortgage management (Thorp et al., 2023 ).

2.4 Financial Literacy and Poverty

Because our research focuses on poverty, the impacts of financial literacy on poverty are separately presented in this subsection. Studies in rural Chinese areas (Wang et al., 2022 ; Xu et al., 2023 ) show that financial literacy alleviates the poverty probability of households in both short and long term. Besides poverty, researchers also point out the positive impacts of financial literacy on poverty-related factors such as wealth and income. Research on the impacts of financial literacy on wealth accumulation in Chile (Behrman et al., 2012 ), The Netherlands (Van Rooij et al., 2012 ) and Japan (Sekita et al., 2022 ) all support a consistent result: financial literacy significantly and positively contributes to the wealth accumulation. Conversely, financial illiteracy is positively correlated with wealth disparity (Jappelli & Padula, 2013 ; Lusardi et al., 2017 ) and negatively correlated with income (Disney & Gathergood, 2011 , 2013 ; Gathergood, 2012 ).

In general, Jappelli et al. ( 2014 ) indicate financial literacy as a driving force in tackling impoverishment worldwide. However, as shown above, there are only two studies in a single country (Xu et al., 2023 ; and Wang et al., 2022 ) directly investigating the impact of financial literacy on poverty. The limited poverty literature can impede global progress in sustainable poverty reduction. As such, there is a growing need for research on the impacts of financial literacy on poverty in various countries and worldwide. This observation warrants our study to be conducted.

The current literature shows a variation in the definition of financial literacy. While it can be broadly defined as financial capability encompassing knowledge, behaviour, and self-efficacy (Xiao et al., 2022 ), it can also be narrowly defined as basic financial knowledge for decision-making (Lusardi & Mitchell, 2014 ). In this study, we utilise the narrow definition of financial literacy, capturing four fundamental concepts, including risk diversification, inflation, basic numeracy, and compound interest.

3 A Theoretical Framework and Hypothesis Development

The relationship between financial literacy and poverty reduction can be elucidated through the human capital theory. We establish the theoretical framework for this study in two steps. First, we review the human capital theory and specify its relevance to financial literacy and poverty reduction. Second, we build on existing literature to theorize the relationship between financial literacy and poverty reduction.

3.1 The Overview of Human Capital Theory

The concept of human capital can be dated back to Smith ( 1776 ) in the work of Adam Smith, while the first formal use in research using the term human capital belongs to Irving Fisher ( 1897 ), and then the theory was popularized by the work of Mincer ( 1958 ), Schultz ( 1961 ) and Becker ( 1962 , 1964 ). The theory posits that economic outputs can be improved by bettering people's inputs, such as education and health (Baldacci et al., 2008 ), and treating these inputs as a form of capital. As such, similar to physical or financial capital, they can be invested. Hence, enhancing financial literacy can positively affect poverty alleviation, which is an economic outcome.

3.2 Financial Literacy, Financial Behaviour, and Poverty

Several studies highlight that for the poor, financial behaviour is more crucial than financial knowledge in improving financial well-being (Xiao & Porto, 2022 ) and, consequently, in reducing poverty. In other words, having knowledge without taking action appears insufficient to decrease the likelihood of falling into poverty. Nonetheless, this does not mean that financial knowledge plays no role in reducing poverty. Indeed, lacking basic financial knowledge can hinder people from adopting healthy financial behaviours such as formal borrowing with better terms, mortgage refinancing (Bialowolski et al., 2022 ), person-to-person (P2P) borrowing (Han et al., 2019 ), avoiding risky credit behaviour (Xiao et al., 2014 ) and financial asset holding (Zhu & Xiao, 2022 ). Grohmann et al. ( 2018 ) highlight the essential role of financial literacy in improving financial inclusion across all circumstances. It boosts bank account ownership and formal savings in both high- and low-financial depth countries.

As such, financial knowledge serves as a critical foundation for financial behaviours, considerably enhancing financial well-being (Xiao & Porto, 2022 ) and financial resilience (Klapper & Lusardi, 2020 ), thereby reducing the probability of falling into poverty. Additionally, by being equipped with financial literacy, people are more motivated and confident in dealing with financial matters; this can be deemed as an effect of self-efficacy—a “hidden” form of human capital (Roy et al., 2018 ). This form of capital implies that people are prone to engage in activities commensurate with the level of proficiency they perceive themselves to possess. Hence, financial literacy catalyzes changing financial behaviour, thereby alleviating poverty. Building on the theoretical model and the discussion of financial literacy in the literature review section, three main hypotheses are proposed:

Financial literacy is negatively associated with the probability of falling into poverty.

Financial literacy is positively associated with desirable financial behaviours, such as bank account ownership ( H 2a ) and formal savings ( H 2b ). In turn, these desirable financial behaviours are negatively associated with the probability of falling into poverty.

4 Data and Methodology

Data used in the empirical analysis in this paper are collected by merging information from three datasets: (i) the S&P Global FinLit Survey 2014, Footnote 1 (ii) the Global Findex 2014 Footnote 2 and (iii) the Gallup World Poll (GWP) 2014 Footnote 3 to form a unique dataset of 150,000 adults across 142 countries. Because these three datasets were conducted jointly by Gallup, Inc., and the World Bank in 2014, they share the same sampling method and respondents. Researchers can easily merge these three datasets since each respondent has a unique identifier. With this rich dataset covering 142 countries in 2014, we can thoroughly examine the relationship between financial literacy and poverty reduction. Details of each dataset are discussed below.

Our empirical analysis centres on the S&P Global FinLit Survey, the most comprehensive global-scale survey on financial literacy (GFLEC, 2023 ). Notably, the S&P Global FinLit Survey was built on the collaboration among Gallup, Inc., the World Bank, and other stakeholders in 2014, leading to a shared sample and sampling method with the Gallup World Poll (GWP). With a universal approach, the S&P Global FinLit Survey measures the understanding of four fundamental financial concepts: (1) risk diversification, (2) inflation, (3) basic numeracy, and (4) interest compounding. Details of financial literacy questions are provided in Table 18 in the Appendix. These concepts closely relate to daily financial decision-making. Particularly, the knowledge of risk diversification is the understanding of reducing risk without sacrificing expected returns in business and investment (Reinholtz et al., 2021 ). Inflation knowledge alerts people of purchasing power fluctuation over time and encourages strategic decisions to cope with its menace. Basic numeracy is essential in financial market activities, particularly in calculating interest to prevent over-indebtedness (Lusardi & Tufano, 2015 ), mortgage delinquency, and default (Gerardi et al., 2013 ). Additionally, proficiency in interest compounding enables individuals to anticipate interest payments and make informed choices for the most beneficial financial products. In addition, we obtain the data on bank account ownership and formal savings from the Global Findex 2014 dataset, which shares the same respondents with the S&P Global FinLit.

Because the data on the socio-demographic characteristics of respondents are limited in the S&P Global FinLit Survey 2014, the GWP is utilized. The GWP is an annual statistical collection of nationally representative on a global scale regarding important issues worldwide (Gallup, 2016 ). From the GWP, we collect information on gender, age, education level, marital status, employment status, urbanicity, and household size. These variables collectively form the baseline model in all our regression analyses and become significantly important for investigating the heterogeneous impacts of financial literacy on the likelihood of falling into poverty across different subsamples regarding demographic and socioeconomic factors. With data from the S&P Global FinLit Survey and the GWP, we can ensure the unbiasedness and reliability of our results for several reasons. Firstly, the Kish grid method is employed to select interviewees randomly and directly interact with these interviewees through face-to-face interviews or 80% telephone coverage (Gallup, 2016 ). Additionally, as they pose uniform questions at the individual level worldwide and employ a robust translation and sampling scheme (Gallup, 2016 ), they mitigate our concern about potential minor errors, as seen in other global surveys.

During the data cleansing process, observations with missing values of used variables are eliminated. Additionally, all respondents are non-poor in some countries, such as Norway. This means that these countries would predict non-poor perfectly and would automatically be removed by the probit model. Therefore, we eliminate these countries from the sample to avoid potential bias. Ultimately, 115,336 observations from 113 countries remain for analysis, accounting for about 77% of the initial sample. The full list of 113 countries is provided in Table 17 in the Appendix. The summary statistics are presented in Table 1 .

4.2 Methodology

We construct the financial literacy score by aggregating correct answers from five financial concept questions (Table 18 ) in the S&P Global FinLit Survey. For each correct answer, respondents score one point, resulting in an aggregate score ranging from 0 to 5.

Next, we categorize respondents into poor and non-poor based on international poverty lines. The procedure to derive this variable is as follows. First, we divide each respondent’s annual income in local currency by the purchasing power parity (PPP) conversion factor (local currency per US$) in 2017, as determined by the World Bank, to estimate the annual income in 2017 US$ PPP. Then, we assign the value 1 to $Poverty_{i}$ if the estimated annual income (2017 US$ PPP) is below the international poverty lines U$ 2.15 (for those in low-income countries), U$ 3.65 (for those in lower–upper-income countries) and U$ 6.85 (for those in upper-middle- and high-income countries) and 0 otherwise. Please refer to Jolliffe and Prdyz ( 2016 ) and Jolliffe et al. ( 2022 ) for rationales behind these international poverty lines.

Because the dependent variable, $Poverty_{i}$ is binary, we utilize a probit regression. The estimation model is specified as follows:

where $i$ represents the respondent. $Poverty_{i}$ is a dummy variable which equals 1 if the respondent is classified as poor, 0 if otherwise. $Finlit_{i}$ denotes the financial literacy score of the respondent. For each correct answer to the five financial concept questions in the S&P Global FinLit Survey, respondents score one point. The aggregate score ranges from 0 to 5. $X_{i}$ is the matrix of control variables. Following Xu et al. ( 2023 ), we employ gender, age, urban residence, household size, educational attainment, marital status, and employment status as individual-level control variables. $Y_{j}$ is the matrix of country dummies. Finally, $e_{j}$ is the error term of the model.

The paper now proceeds to report and discuss the findings. First, the empirical results regarding the association of financial literacy with the probability of populations across 113 countries falling into poverty are reported. This is followed by a heterogeneity analysis, an analysis of financial literacy components, and a mediation analysis.

5.1 Main Results

The estimated coefficients of financial literacy are shown in Table 2 . Columns 1 and 2 show the empirical results from probit models. Socio-demographic factors (i.e., age, education, employment status, and others) are incorporated as control variables in all models. Furthermore, the country where respondents live can affect economic opportunities, access to education, and the availability of financial resources, which consequently affect poverty. Hence, country dummies are added to control variations across countries.

Column 1 shows that financial literacy negatively affects the probability of falling into poverty. The slope coefficient of financial literacy is statistically significant at the 1 per cent level. Holding other things constant, a unit increase in the financial literacy index corresponds to a 6.2% decrease in the probability of falling into poverty. This coefficient even increases from 6.2 to 7.5% after controlling variations across countries (Column 2). Overall, the results indicate that financial literacy is negatively associated with the probability of falling into poverty, supporting Hypothesis 1.

5.2 Heterogeneity Analysis

Using probit models with Gaussian copula, we then analyze the heterogeneous association of financial literacy with the likelihood of being poor across sub-samples divided based on socio-demographic factors, regions and country income levels. The Shapiro–Wilk tests conducted in all models reject the null hypothesis of normality of financial literacy (the endogenous variable), suggesting that Gaussian copula estimations are appropriate (Park & Gupta, 2012 ). The results for demographic and socioeconomic groups are shown in Tables 3 and 4 , respectively. Next, the results for different regions and income groups are provided in Tables 5 and 6 , respectively.

As shown in Table 3 , financial literacy significantly and negatively affects poverty across different demographic groups. Specifically, financial literacy exerts a larger association with poverty among female, old and married populations than the opposite (male, young and unmarried). To start, we compared the association of financial literacy with the chances of escaping from poverty by gender of respondents. Results show that a financially literate woman can decrease the likelihood of falling into poverty by 17%, compared with the poverty reduction of 13.2% by a man having financial knowledge (Columns 1 and 2). A similar pattern is also observed in a 2014 World Bank report on traditional literacy terms, which found that each additional year of schooling boosts women’s earnings by an average of 11.7% versus 9.6% for men (Montenegro & Patrinos, 2014 ). Regarding age, financial literacy has a greater association with poverty reduction among old people (aged 60 and over) than young ones. Ceteris paribus, a unit increase in financial literacy can lead to a 14.2% decrease in the likelihood of falling into poverty for older people and a 13.8% decrease for younger ones. The association of an individual's financial understanding with the risk of falling into poverty, categorized by marital status, are presented in columns 5 and 6 of Table 3 . The results show that financially literate married individuals have a 17.7% lower likelihood of falling into poverty, which is 5.5% higher compared to unmarried individuals.

Regarding socioeconomic groups, the results are reported in Table 4 concerning urban residence in Columns 1 and 2, employment status in Columns 3 and 4, and education attainment in Columns 5–7. Results show that the association of financial literacy with poverty are more pronounced among residents with low socioeconomic status (rural, unemployed, and low-education-level residents). Specifically, financial literacy exerts a larger association with poverty reduction among rural residents than urban ones. A financially literate person living in rural areas can decrease the likelihood of falling into poverty by 15.4%, compared to a decrease of 11.4% for those living in urban areas. Similarly, a one-unit increase in financial literacy is associated with a poverty reduction of 16.8% among employed individuals, while it just fell by 14% among those unemployed (Columns 3 and 4). Next, we examine in more detail how financial knowledge differentially affects poverty alleviation among individuals who have completed tertiary education or higher, those who completed secondary education and those who completed primary education or lower. Financial literacy has a smaller association with the chances of escape from poverty among people with a bachelor’s degree. Specifically, an increase in financial literacy corresponds to a decrease in the likelihood of falling into poverty by 18.8% for individuals who completed primary education (Column 7) and by 8% for those who completed secondary education (Column 6). These coefficients are statistically significant at 1% level. Meanwhile, the effect decreases to 6.8% for those with a bachelor’s degree. The coefficient of financial literacy even turns out to be insignificant for those with a bachelor’s degree, implying that financial literacy may have no effect in this group (Column 5).

Several studies indicate variations in financial knowledge and financial behaviours across countries with different cultures (Biolowalski et al., 2023 ) and developmental stages (Xiao & Biolowalski, 2023 ). Biolowalski et al. ( 2023 ) find that individualism, long-term orientation, and indulgence are positively correlated with financial capability (which includes financial knowledge and behaviour), whereas uncertainty avoidance exhibits a negative correlation. Interestingly, Xiao and Biolowalski ( 2023 ) show that financial capability exhibits a stronger correlation with human development in highly developed countries, implying that promoting financial capability is more cost-effective and beneficial in these countries. Therefore, we conduct further analysis to examine the heterogeneity in the relationship between financial literacy and poverty across regions and country income levels . Regarding regions, as shown in Table 5 , the coefficients of financial literacy are negative and statistically significant across East Asia and Pacific, Europe and Central Asia, Latin America and the Caribbean, North America, and Sub-Saharan Africa (Table 5 ). However, in South Asia and the Middle East & North Africa, although the coefficients remain negative, they are not statistically significant. Regarding country income levels, financial literacy has the largest association with poverty in low-income countries and the smallest association with poverty in high-income countries (Table 6 ). Holding other things constant, a unit increase in the financial literacy index can lead to a 32.5% (9.3%) decrease in the likelihood of falling into poverty in low-income (high-income) countries. The coefficients of financial literacy are statistically significant across all country income levels. These results suggest that while financial knowledge may be more beneficial to high-income countries in terms of human development—a broad measure encompassing education, health, and income (Xiao & Biolowalski, 2023 ), it is more advantageous for low-income countries in reducing poverty, which is a narrower measure capturing income levels and basic needs.

5.3 Robustness Check

This sub-section presents results from the robustness tests to assess whether the effects of financial literacy on the probability of falling into poverty are causal. First, to address potential endogeneity issues that can mislead financial literacy’s actual impacts on poverty, we follow Shin et al. ( 2022 ) to employ probit models with the Gaussian copula term. Specifically, the Gaussian copula term of financial literacy is $Copula term_{Financial Literacy} = \emptyset^{ - 1} \left( {H_{Financial Literacy} } \right)$ , where $\emptyset^{ - 1}$ is the inverse of the cumulative normal distribution and $H_{Financial Literacy}$ is the empirical distribution functions of financial literacy score. Eckert and Hohberger ( 2023 ) provide instructions on how to build the Gaussian copula term using Stata software. The Gaussian copula term can control the correlation between financial literacy and error terms. The results are reported in Columns 3 and 4 of Table 2 . The Shapiro–Wilk test result indicates that financial literacy is non-normally distributed, confirming the appropriateness of Gaussian copula estimations (Park & Gupta, 2012 ). The alleviating effects of financial literacy on poverty remain consistent when Gaussian copula terms are included in models (Columns 3 and 4). After controlling for endogeneity concerns, the effect size of financial literacy even increases to 13.7% (Column 4). The Gaussian copula term is moderately statistically significant in Column 3 and turns out to be statistically insignificant in Column 4, where country dummies are added. These results indicate that endogeneity issues are not severe in probit models with country-fixed effects. Generally, these results suggest that financial literacy exerts alleviating effects on the probability of populations across more than 100 countries falling into poverty.

Second, in order to test whether the relationship between financial literacy and the probability of falling into poverty is affected by omitted variable bias, we employ a novel approach, namely, Rubin’s ( 1974 ) causal model. This model allows researchers to conduct a robustness of inference to replacement (RIR) analysis and the impact threshold of a confounding variable (ITCV) analysis (Frank, 2000 ; Frank et al., 2013 ; Xu et al., 2019 ). The RIR analysis quantifies how many observed cases need to be replaced with the opposite cases to invalidate the causal inference. The ITCV analysis indicates how correlated an omitted variable would have to be with the independent and dependent variables for the statistical inference to change. Indeed, the RIR analysis is a part of the ITCV analysis family (Frank, 2000 ). Xu et al. ( 2019 ) suggest that for a nonlinear model, the ITCV analysis should not be used because it is correlation-based and thus applies only to linear cases. Instead, the per cent bias to invalidate the inference (i.e., RIR) should be applied in this case (see also Busenbark et al., 2022 for further guidance on deciding whether to use ITCV or RIR); since our model is non-linear, we conduct the RIR analysis, using the konfound command (Xu et al., 2019 ) in Stata with the nonlinear option specified.

The results are presented in Table 7 . In Column 1, it is shown that up to 85.89% of observations in our sample would need replacement to invalidate the effects of financial literacy on poverty. This corresponds to 99,062 out of 115,336 observations, as indicated in Column 2. In other words, to invalidate the inference, 85.89% (99,062) of the cases would have to be replaced with cases with an effect of 0. We thus conclude that omitted variable bias is not a major concern in our analysis.

Similar patterns are also observed in sub-samples (Tables 8 , 9 and 10 ). For demographic groups, from 75 to 84% of the cases would have to be replaced with cases for which there is an effect of 0 to invalidate the causal inference (Table 8 ). This implies that omitted variable bias is highly unlikely to affect the impacts of financial literacy on poverty in demographic groups. Table 9 also indicates that omitted variable bias is not severe among socioeconomic groups. However, for the group with tertiary or higher education, only 8.33% of the cases needed to be replaced with counterfactual cases to invalidate the impact of financial literacy on poverty. For regions, results from Table 10 indicate that the estimated effect of financial literacy on poverty is vulnerable to omitted variable bias in North America because only 1.87% of cases need to be replaced to invalidate the inference. In contrast, the effect of financial literacy is robust in other regions. Additionally, as shown in Table 11 , the effect of financial literacy on poverty is also robust across different income levels.

Third, in line with Chaudhry and Shafiullah ( 2021 ), we also employ OLS and Lewbel’s ( 2012 ) instrumental variable approach to examine whether our results change under different estimation models. Unlike the traditional instrumental variable approach, which necessitates external instrumental variables for endogenous variables in the model, Lewbel’s ( 2012 ) instrumental variable approach self-generates internal variables from the heteroscedasticity of the model. This approach has been widely employed in the literature as a robustness check when traditional instruments are used or when external instruments are lacking (Churchill & Smyth, 2017 ; Wang & Cheng, 2022 ). Prior research suggests that the instrumental variable (IV) estimates obtained by this method are nearly identical to those obtained by using conventional validated IVs (Umberger et al., 2015 ). The Lewbel's ( 2012 ) approach is briefly outlined as below:

where $Y_{1}$ stands for the dependent variable. $Y_{2}$ refers to the endogenous variable. $U$ denotes the unobserved characteristics that can affect both $Y_{1}$ and $Y_{2}$ . $V_{1}$ and $V_{2}$ are idiosyncratic errors. Lewbel ( 2012 ) posits that there exists a vector $Z$ of observed exogenous variables meeting the conditions that $E\left( {X\varepsilon_{1} } \right) = 0$ , $E\left( {X\varepsilon_{2} } \right) = 0$ , $Cov = \left( {Z, \varepsilon_{1} \varepsilon_{2} } \right)$ , with some degree of heteroskedasticity in $\varepsilon_{j}$ . The vector Z may be a subset of X or equivalent to X. Under these conditions, $\left[ {Z - E\left( Z \right)} \right]\varepsilon_{2}$ can serve as a vector of valid instruments satisfying the standard rank condition. We regress financial literacy on $\tilde{\user2{X}}$ and then obtain the residuals $\widehat{{\varepsilon_{2} }}$ , which are consistent estimates of the reduced form error $\varepsilon_{2}$ . The estimated residuals are then used to create $\left[ {Z - E\left( Z \right)} \right]\widehat{{\varepsilon_{2} }}$ as self-generated internal instruments for estimation.

The results are presented in Columns 1 and 2 of Table 15 . The Breusch–Pagan test rejects the null hypothesis of homoscedasticity, indicating that Lewbel’s ( 2012 ) approach is appropriate in this case. The coefficients of financial literacy are still statistically significant and negative. This implies that financial literacy exerts causal impacts on the likelihood of falling into poverty worldwide.

Finally, as our respondents are nested in countries, those from the same country may share some common characteristics that potentially affect their financial literacy and the likelihood of falling into poverty. If this holds true, the estimated effects of financial literacy on poverty can be biased and invalid. Multilevel modelling is often adopted to deal with such hierarchical data. As our dependent variable is a dummy variable, which equals 1 if the respondent is poor and 0 if otherwise, multilevel probit modelling with individuals at level 1 and countries at level 2 will be employed. In addition, because there is no obvious evidence that the effect sizes of financial literacy vary across countries, random intercept multilevel probit modelling is utilized. The estimation is specified below.

where $i$ and $j$ represent the respondent and country, respectively. $Poverty_{ij}$ is a dummy variable which equals 1 if the respondent is classified as poor, 0 if otherwise. $Finlit_{ij}$ is the financial literacy score of the respondent. $X_{ij}$ is the matrix of individual-level control variables. $Y_{j}$ is the matrix of country-level control variables. Data on country-level control variables, including GDP per capita, the proportion of private credit to GDP, trade openness, foreign direct investment, internet users (% of the population), mobile cellular subscriptions (% of the population), rule of law index, political stability index, and control of corruption index, are collected from World Development Indicators (WDI). Finally, $u_{ij}$ and $e_{j}$ are level 1 (individual) and 2 (country) error terms.

The results are reported in Table 16 . It can be observed that financial literacy has a statistically significant and negative effect on the likelihood of falling into poverty (Column 1). As shown in Columns 2–10, the coefficients of financial literacy remain statistically significant and negative when country-level variables are added to the model in Column 1. This implies that our results are robust to variations across countries.

5.4 Financial Literacy Components

In this sub-section, we examine each financial literacy component, including (i) risk diversification, (ii) inflation, (iii) numeracy (capacity to do simple calculations regarding interest rates) and (iv) compound interest. As shown in Table 12 , all four components are significantly and negatively associated with the probability of falling into poverty. The rationales behind these results are as follows. First, numeracy is essential for everyone in managing everyday finance decisions, such as budgeting, comparing prices, and understanding bills. Second, understanding how interest accumulates can help individuals avoid predatory lending and seek more favourable credit terms, reducing the likelihood of falling into debt traps. Third, understanding how inflation erodes purchasing power may encourage seeking out interest-bearing accounts and other savings mechanisms that keep pace with inflation. This knowledge helps individuals protect their financial resources from losing value over time, resulting in a decrease in the probability of falling into poverty. Finally, knowledge of risk diversification can help individuals diversify assets and investments, reducing vulnerability to financial shocks and building resilience against unexpected events.

However, there are differences in their magnitudes. Specifically, compound interest, numeracy, and inflation have the first, second, and third largest associations with poverty. In contrast, the coefficient of risk diversification is the smallest. This suggests that knowledge of compound interest, numeracy, and inflation is more essential for people than knowledge of risk diversification. On the one hand, as discussed above, compound interest, numeracy, and inflation are fundamental concepts that directly help in making daily financial decisions, avoiding predatory lending and obtaining better interest term loans (Bialowolski et al., 2022 ), all of which are significant factors that can contribute to the risk of falling into poverty. On the other hand, risk diversification is more relevant to individuals with surplus income or investments. For people without investments, the concept of risk diversification is less applicable, as they do not face the same level of financial risk as those with investments. Conversely, individuals without investments often rely on stable sources of income, such as wages, salaries, or government benefits, which are less susceptible to market fluctuations than investments such as stocks and bonds. Therefore, the immediate impact of risk diversification may be limited for individuals in poverty compared to the direct relevance of other concepts. Indeed, risk diversification is the least understood concept, with only 35% of adults answering correctly (Klapper & Lusardi, 2020 ).

5.5 Mediation Analysis

This sub-section examines possible mediating channels in the relationship between financial literacy and poverty. Two mediating channels are considered: bank account ownership and formal savings. To do so, we follow the procedure outlined in Barkat et al. ( 2023 ) and Alesina and Zhuravskaya ( 2011 ). The procedure imposes two conditions for bank account ownership and formal savings to serve as mediating channels. The first condition, known as the correlation condition , stipulates that financial literacy must be significantly correlated with bank account ownership and formal savings. The second condition, known as the magnitude condition , requires the magnitude of the coefficient of financial literacy to decrease when bank account ownership and formal savings are incorporated into the model with poverty as the dependent variable. Equations ( 1 ), ( 3 ) and ( 4 ) are used to verify the mediating channels.

where $i$ represents the respondent. $Poverty_{i}$ , $Finlit_{i}$ , $X_{i}$ and $Y_{i}$ are poverty status, financial literacy score, the matrix of control variables and the matrix of country dummies, respectively. $Mediators_{i}$ is the matrix of bank account ownership dummy (1 if the respondent owns a bank account, 0 if otherwise) and formal savings dummy (1 if the respondent saved at a formal institution in the past 12 months, 0 if otherwise).

The results of the correlation between financial literacy and mediators, as specified in Eq. ( 3 ), are presented in Table 13 . Results presented in Columns 1 and 2 suggest that financial literacy significantly and positively correlates with bank account ownership and formal savings. Next, the results of the magnitude condition, as specified in Eqs. ( 1 ) and ( 4 ), are reported in Table 14 . The magnitude of the coefficient of financial literacy decreases as bank account ownership and formal savings are incorporated into the model (Columns 1–3). As such, bank account ownership and formal savings are qualified as mediating variables in the association between financial literacy and poverty, supporting Hypothesis 2. Indeed, financial literacy encourages desirable financial behaviours (Grohmann et al., 2018 ), which may lead to a decrease in the probability of falling into poverty.

6 Discussions

We have discovered a negative association between financial literacy and the likelihood of falling into poverty across 113 countries globally. Furthermore, we provide evidence supporting a causality from financial literacy to poverty reduction by adopting probit estimations with Gaussian copula terms. Overall, our findings suggest that financial literacy can serve as a pivotal instrument in the process of tackling poverty worldwide. Interestingly, financial literacy is found to have a heterogeneous association with poverty in different demographic groups, socioeconomic groups, regions, and country income levels. Moreover, we demonstrate that desirable financial behaviours, such as account ownership and formal savings, serve as the mediating variables in the relationship between financial literacy and poverty. This sub-section will further discuss and provide possible explanations for these findings.

To begin with, we will provide possible explanations for the mitigating effects of financial literacy on poverty. Regarding the underlying mechanisms through which financial literacy can reduce poverty, the empirical evidence is still relatively scarce. However, there are several potential mechanisms through which financial literacy can affect poverty. On the one hand, as mentioned in Sect. 2.3 , financial literacy positively influences account ownership and usage, formal savings, formal borrowing, stock participation, portfolio performance, insurance usage, debt management ability and retirement planning. Furthermore, empirical analysis from this study verifies the mediating role of account ownership and formal savings in the relationship between financial literacy and poverty.

On the other hand, these impacts correlate with poverty reduction in multifaceted ways. First, savings facilitate escape from poverty by smoothing consumption and financing productive investments (Karlan et al., 2014 ; Pomeranz & Kast, 2022 ), preventing indebtedness and debt-trap situations (Lister, 2006 ). Especially those equipped with emergency savings possess the advantageous ability to shield themselves from prolonged financial hardships resulting from adverse economic events (Diwakar & Shepherd, 2022 ; Shah et al., 2012 ), thereby attaining financial resilience, reducing the poverty risk (Hasler et al., 2018 ; Lusardi et al., 2011 ). Second, insurance defences against the risk of future poverty among customers (Koomson et al., 2020a ), improving risk-taking and managing capacities (Hong et al., 2020 ; Wang et al., 2022 ) to accumulate more in the financial market and entrepreneurship, taking great steps in the poverty alleviation process (Bucher-Koenen & Ziegelmeyer, 2014 ; Guiso & Viviano, 2015 , Klapper et al., 2013 ). Third, shifting lending behaviour from informal sources to formal institutions is also associated with eliminating irrational economic behaviours and financial constraints, facilitating households' escape from poverty (Sarthak & Ashish, 2012 ). Fourth, implementing effective debt management also helps reduce the likelihood of over-indebtedness (Gathergood, 2012 ), mortgage delinquency, and default (Gerardi et al., 2013 ). The fifth mechanism entails the advantages of heightened demand for bank accounts and debit cards. While Kefela ( 2011 ) exhibits that having an account at a bank or other financial institution is an important first step for financially literate people to participate in the financial system, Lusardi and Messy ( 2023 ) assert the influence of this participation on the efficiency and soundness of financial systems. As the financial system improves with more financially literate participants, it facilitates economic growth and alleviates poverty in middle- and high-income countries (Dhrifi, 2015 ). Sixth, Setor et al. ( 2021 ) examine data from 111 developing countries from 2010 to 2018, conclusively identifying digital transactions as a valuable tool in mitigating corruption and poverty by enhancing transparency, given the bidirectional causality between corruption and poverty (Han et al., 2022 ; Justesen & Bjørnskov, 2014 ). Seventh, asset and livelihood diversification is confirmed to have a negative association with poverty (Martin & Lorenzen, 2016 ). Eighth, entrepreneurship, viewed through different lenses, addresses poverty by addressing resource scarcity (remediation), social exclusion (reform), and challenging capitalist tenets (revolution) (see Sutter et al., 2019 for a review of related literature). Ninth, the reduction of anxiety among individuals can also help them escape from the cyclic nature of poverty—mental disorder (Anakwenze & Zuberi, 2013 ; Lund et al., 2011 ). Finally, effective retirement plans are also associated with increased wealth accumulation and poverty alleviation, particularly during old age (Lusardi & Mitchell, 2011b ; Behrman et al., 2012 ). Overall, the alleviating effect of financial literacy on poverty may be explained through many mechanisms, including savings, emergency funds, insurance usage, lending from formal institutions, debt management, usage of bank accounts and debit cards, digital transactions, asset diversification, entrepreneurship, and retirement plans.

7 Conclusions and Policy Implications

Our study explores how financial literacy affects the likelihood of individuals falling into poverty worldwide. Our analyses confirm that financial literacy significantly and negatively affects poverty. This result remains largely unchanged across different socio-demographic groups, regions, and country income levels, implying that our results can be applicable in various contexts. The coefficients of financial literacy are still statistically significant and consistent in terms of signs across robustness tests, including (i) probit models with Gaussian copula terms (addressing endogeneity concerns), (ii) multilevel probit models (considering variations across countries) and (iii) the Rubin’s ( 1974 ) causal model. Moreover, we find a notable heterogeneity in the impacts of financial literacy across subsamples. For demographic groups, the negative correlation between financial literacy and poverty is more pronounced among females, older individuals, and married individuals than their counterparts (males, young individuals, and unmarried individuals). In socioeconomic groups, residents of rural areas, those unemployed, and individuals with or without a primary degree are likely to derive greater benefits from financial literacy compared to their counterparts in the respective dimensions. Across regions, those living in East Asia, the Pacific, and Sub-Saharan Africa demonstrate the first and second largest decreases in the likelihood of poverty, with the same increase in financial literacy. Meanwhile, the coefficient of financial literacy turns out to be statistically insignificant in South Asia, the Middle East & North Africa, suggesting that financial literacy may not have any effect on poverty. Financial literacy has the most substantial impact on reducing the likelihood of poverty among citizens in lower-middle-income and low-income countries. Conversely, its association with the risk of poverty among individuals in high-income countries is the lowest.

Policy implications have emerged based on these insightful findings. First, governments should implement comprehensive financial education programs targeting various socio-demographic groups or incorporate financial topics into school curriculum. These programs should cover essential topics in finance, such as inflation, compound interest, risk diversification and debt management. Second, governments may consider providing funds for financial education initiatives such as community-based workshops, online courses, and financial educational materials to reach a broad audience. Moreover, financial literacy can serve as a powerful instrument to mitigate disparities in poverty rates among females, the elderly, the unmarried, rural residents, the unemployed, individuals with lower education levels, inhabitants in East Asia and Pacific and Sub-Saharan Africa, and those in lower-middle and low-income countries due to its larger association with poverty reduction in these groups compared to their counterparts. Therefore, these groups should receive targeted attention from governments to enhance their financial literacy levels and address poverty and disparities in poverty rates. In particular, we suggest specific policy implications that governments can take into consideration.

While females, the elderly, and the separated or divorced are the most beneficiaries of financial literacy in poverty reduction, their awareness and conditions to make use of these advantages are limited, given that they tend to be biased as they should not and cannot make sound financial decisions. That is, policymakers need to simultaneously break down social stereotypes about their financial ability and facilitate their financial literacy improvement. On the one hand, more research about the financial ability of people with these demographic factors should be implemented and widely popularized to dispel stereotypes and provide evidence-based insights. Popularization can be achieved through continuous dialogue and awareness campaigns in educational institutions, workplaces, and online platforms, ensuring universality in access. Additionally, celebrating the achievements of women, the elderly, and unmarried individuals who leverage their financial knowledge to build wealth and safeguard assets is crucial. Their success stories should be prominently featured in media and journals as exemplary cases, inspiring others and challenging prevailing stereotypes. This concerted effort contributes to a cultural shift that recognizes and values experiences and perspectives in the financial decision-making of females, people aged above 70, and the unmarried. On the other hand, policymakers should make more effort to facilitate better financial literacy among these target groups. As financial education is a fundamental measure to increase financial literacy, governments may expand policies to stimulate people's participation and interest in financial education programs. For example, people with unfavourable demographic factors could receive free government-sponsored financial education, offer tax incentives or subsidies to residents participating in financial education, integrate financial literacy requirements into welfare programs, provide additional benefits or incentives for participants in financial education, and so on. Through the implementation of diverse and targeted measures, governments have the potential to significantly enhance the representation of females, individuals over 70, and those who are separated or divorced in the financial market. This, in turn, can contribute to reducing poverty levels and foster a higher rate of economic development.

Recognizing the amplified association between financial literacy and poverty reduction in specific socioeconomic groups, governments may prioritize allocating more resources to financial literacy programs that target residents with low socioeconomic status (rural, unemployed, and low-education-level ones). Also, to ensure that the content is relevant and accessible, financial literacy programs should be customized to address the unique financial circumstances of individuals in rural areas, the unemployed, and those with low education levels. Moreover, given that residents of low socioeconomic status are usually beneficiaries of social assistance programs, financial education components should be integrated into existing programs, such as unemployment benefits or rural welfare-oriented programs. In this way, countries can achieve sustainable poverty reduction instead of temporarily reducing poverty. By empowering individuals to make informed financial decisions in the long term, this approach addresses immediate financial needs, temporarily reduces poverty, and aims to reduce poverty sustainably.

Given these heterogeneous associations for residents in low-income countries and those in East Asia and Pacific and Sub-Saharan Africa, officials of these nations have the privilege of bridging the gap with other nations in eradicating poverty and moving up the economic ladder. To capitalize on this advantage, policymakers in East Asia and the Pacific, Sub-Saharan Africa, and low-income countries may consider enhancing financial literacy as an important and urgent national task that requires prioritizing attention and resources. Concurrently, the government should increase investments in developing financial infrastructure while implementing stringent regulations to foster a secure and readily accessible financial market for individuals and businesses. National strategies must be implemented consistently, effectively, and creatively to turn their potential into reality. For example, Vietnam's Prime Minister has approved the National Financial Inclusion Strategy until 2025. It clearly states the viewpoints, goals, tasks, and solutions to promote access and usage of financial goods and services for all residents and businesses, with a focus on those living in rural areas, low-income people, women, and other disadvantaged groups (Viet Nam Government Portal, 2022 ).

Data Availability

The data underlying this article cannot be shared publicly due to its proprietary nature, as stipulated by the survey owners.

This dataset is proprietary. To request access, please visit https://gflec.org/initiatives/sp-global-finlit-survey/ .

This dataset is publicly available at: https://www.worldbank.org/en/publication/globalfindex .

This dataset is proprietary. To request access, please visit https://www.gallup.com/analytics/ .

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Lang, N.D., Tran, H.M., Nguyen, G.T. et al. An Untapped Instrument in the Fight Against Poverty: The Impacts of Financial Literacy on Poverty Worldwide. Soc Indic Res (2024). https://doi.org/10.1007/s11205-024-03404-w

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Global Energy Crisis

How the energy crisis started, how global energy markets are impacting our daily life, and what governments are doing about it

English English

What is the energy crisis?

Record prices, fuel shortages, rising poverty, slowing economies: the first energy crisis that's truly global.

Energy markets began to tighten in 2021 because of a variety of factors, including the extraordinarily rapid economic rebound following the pandemic. But the situation escalated dramatically into a full-blown global energy crisis following Russia’s invasion of Ukraine in February 2022. The price of natural gas reached record highs, and as a result so did electricity in some markets. Oil prices hit their highest level since 2008.

Higher energy prices have contributed to painfully high inflation, pushed families into poverty, forced some factories to curtail output or even shut down, and slowed economic growth to the point that some countries are heading towards severe recession. Europe, whose gas supply is uniquely vulnerable because of its historic reliance on Russia, could face gas rationing this winter, while many emerging economies are seeing sharply higher energy import bills and fuel shortages. While today’s energy crisis shares some parallels with the oil shocks of the 1970s, there are important differences. Today’s crisis involves all fossil fuels, while the 1970s price shocks were largely limited to oil at a time when the global economy was much more dependent on oil, and less dependent on gas. The entire word economy is much more interlinked than it was 50 years ago, magnifying the impact. That’s why we can refer to this as the first truly global energy crisis.

Some gas-intensive manufacturing plants in Europe have curtailed output because they can’t afford to keep operating, while in China some have simply had their power supply cut. In emerging and developing economies, where the share of household budgets spent on energy and food is already large, higher energy bills have increased extreme poverty and set back progress towards achieving universal and affordable energy access. Even in advanced economies, rising prices have impacted vulnerable households and caused significant economic, social and political strains.

Climate policies have been blamed in some quarters for contributing to the recent run-up in energy prices, but there is no evidence. In fact, a greater supply of clean energy sources and technologies would have protected consumers and mitigated some of the upward pressure on fuel prices.

Russia's invasion of Ukraine drove European and Asian gas prices to record highs

Evolution of key regional natural gas prices, june 2021-october 2022, what is causing it, disrupted supply chains, bad weather, low investment, and then came russia's invasion of ukraine.

Energy prices have been rising since 2021 because of the rapid economic recovery, weather conditions in various parts of the world, maintenance work that had been delayed by the pandemic, and earlier decisions by oil and gas companies and exporting countries to reduce investments. Russia began withholding gas supplies to Europe in 2021, months ahead of its invasion of Ukraine. All that led to already tight supplies. Russia’s attack on Ukraine greatly exacerbated the situation . The United States and the EU imposed a series of sanctions on Russia and many European countries declared their intention to phase out Russian gas imports completely. Meanwhile, Russia has increasingly curtailed or even turned off its export pipelines. Russia is by far the world’s largest exporter of fossil fuels, and a particularly important supplier to Europe. In 2021, a quarter of all energy consumed in the EU came from Russia. As Europe sought to replace Russian gas, it bid up prices of US, Australian and Qatari ship-borne liquefied natural gas (LNG), raising prices and diverting supply away from traditional LNG customers in Asia. Because gas frequently sets the price at which electricity is sold, power prices soared as well. Both LNG producers and importers are rushing to build new infrastructure to increase how much LNG can be traded internationally, but these costly projects take years to come online. Oil prices also initially soared as international trade routes were reconfigured after the United States, many European countries and some of their Asian allies said they would no longer buy Russian oil. Some shippers have declined to carry Russian oil because of sanctions and insurance risk. Many large oil producers were unable to boost supply to meet rising demand – even with the incentive of sky-high prices – because of a lack of investment in recent years. While prices have come down from their peaks, the outlook is uncertain with new rounds of European sanctions on Russia kicking in later this year.

What is being done?

Pandemic hangovers and rising interest rates limit public responses, while some countries turn to coal.

Some governments are looking to cushion the blow for customers and businesses, either through direct assistance, or by limiting prices for consumers and then paying energy providers the difference. But with inflation in many countries well above target and budget deficits already large because of emergency spending during the Covid-19 pandemic, the scope for cushioning the impact is more limited than in early 2020. Rising inflation has triggered increases in short-term interest rates in many countries, slowing down economic growth. Europeans have rushed to increase gas imports from alternative producers such as Algeria, Norway and Azerbaijan. Several countries have resumed or expanded the use of coal for power generation, and some are extending the lives of nuclear plants slated for de-commissioning. EU members have also introduced gas storage obligations, and agreed on voluntary targets to cut gas and electricity demand by 15% this winter through efficiency measures, greater use of renewables, and support for efficiency improvements. To ensure adequate oil supplies, the IEA and its members responded with the two largest ever releases of emergency oil stocks. With two decisions – on 1 March 2022 and 1 April – the IEA coordinated the release of some 182 million barrels of emergency oil from public stocks or obligated stocks held by industry. Some IEA member countries independently released additional public stocks, resulting in a total of over 240 million barrels being released between March and November 2022.

The IEA has also published action plans to cut oil use with immediate impact, as well as plans for how Europe can reduce its reliance on Russian gas and how common citizens can reduce their energy consumption . The invasion has sparked a reappraisal of energy policies and priorities, calling into question the viability of decades of infrastructure and investment decisions, and profoundly reorientating international energy trade. Gas had been expected to play a key role in many countries as a lower-emitting "bridge" between dirtier fossil fuels and renewable energies. But today’s crisis has called into question natural gas’ reliability.

The current crisis could accelerate the rollout of cleaner, sustainable renewable energy such as wind and solar, just as the 1970s oil shocks spurred major advances in energy efficiency, as well as in nuclear, solar and wind power. The crisis has also underscored the importance of investing in robust gas and power network infrastructure to better integrate regional markets. The EU’s RePowerEU, presented in May 2022 and the United States’ Inflation Reduction Act , passed in August 2022, both contain major initiatives to develop energy efficiency and promote renewable energies.

The global energy crisis can be a historic turning point

Energy saving tips

Global Energy Crisis Energy Tips Infographic

1. Heating: turn it down

Lower your thermostat by just 1°C to save around 7% of your heating energy and cut an average bill by EUR 50-70 a year. Always set your thermostat as low as feels comfortable, and wear warm clothes indoors. Use a programmable thermostat to set the temperature to 15°C while you sleep and 10°C when the house is unoccupied. This cuts up to 10% a year off heating bills. Try to only heat the room you’re in or the rooms you use regularly.

The same idea applies in hot weather. Turn off air-conditioning when you’re out. Set the overall temperature 1 °C warmer to cut bills by up to 10%. And only cool the room you’re in.

2. Boiler: adjust the settings

Default boiler settings are often higher than you need. Lower the hot water temperature to save 8% of your heating energy and cut EUR 100 off an average bill. You may have to have the plumber come once if you have a complex modern combi boiler and can’t figure out the manual. Make sure you follow local recommendations or consult your boiler manual. Swap a bath for a shower to spend less energy heating water. And if you already use a shower, take a shorter one. Hot water tanks and pipes should be insulated to stop heat escaping. Clean wood- and pellet-burning heaters regularly with a wire brush to keep them working efficiently.

3. Warm air: seal it in

Close windows and doors, insulate pipes and draught-proof around windows, chimneys and other gaps to keep the warm air inside. Unless your home is very new, you will lose heat through draughty doors and windows, gaps in the floor, or up the chimney. Draught-proof these gaps with sealant or weather stripping to save up to EUR 100 a year. Install tight-fitting curtains or shades on windows to retain even more heat. Close fireplace and chimney openings (unless a fire is burning) to stop warm air escaping straight up the chimney. And if you never use your fireplace, seal the chimney to stop heat escaping.

4. Lightbulbs: swap them out

Replace old lightbulbs with new LED ones, and only keep on the lights you need. LED bulbs are more efficient than incandescent and halogen lights, they burn out less frequently, and save around EUR 10 a year per bulb. Check the energy label when buying bulbs, and aim for A (the most efficient) rather than G (the least efficient). The simplest and easiest way to save energy is to turn lights off when you leave a room.

5. Grab a bike

Walking or cycling are great alternatives to driving for short journeys, and they help save money, cut emissions and reduce congestion. If you can, leave your car at home for shorter journeys; especially if it’s a larger car. Share your ride with neighbours, friends and colleagues to save energy and money. You’ll also see big savings and health benefits if you travel by bike. Many governments also offer incentives for electric bikes.

6. Use public transport

For longer distances where walking or cycling is impractical, public transport still reduces energy use, congestion and air pollution. If you’re going on a longer trip, consider leaving your car at home and taking the train. Buy a season ticket to save money over time. Your workplace or local government might also offer incentives for travel passes. Plan your trip in advance to save on tickets and find the best route.

7. Drive smarter

Optimise your driving style to reduce fuel consumption: drive smoothly and at lower speeds on motorways, close windows at high speeds and make sure your tires are properly inflated. Try to take routes that avoid heavy traffic and turn off the engine when you’re not moving. Drive 10 km/h slower on motorways to cut your fuel bill by around EUR 60 per year. Driving steadily between 50-90 km/h can also save fuel. When driving faster than 80 km/h, it’s more efficient to use A/C, rather than opening your windows. And service your engine regularly to maintain energy efficiency.

Analysis and forecast to 2026

Fuel report — December 2023

Photo Showing Portal Cranes Over Huge Heaps Of Coal In The Murmansk Commercial Seaport Russia Shutterstock 1978777190

Europe’s energy crisis: Understanding the drivers of the fall in electricity demand

Commentary — 09 May 2023

Where things stand in the global energy crisis one year on

Commentary — 23 February 2023

The global energy crisis pushed fossil fuel consumption subsidies to an all-time high in 2022

Commentary — 16 February 2023

Fossil Fuels Consumption Subsidies 2022

Policy report — February 2023

Aerial view of coal power plant high pipes with black smoke moving up polluting atmosphere at sunset.

Background note on the natural gas supply-demand balance of the European Union in 2023

Report — February 2023

Analysis and forecast to 2025

Fuel report — December 2022

Photograph of a coal train through a forest

How to Avoid Gas Shortages in the European Union in 2023

A practical set of actions to close a potential supply-demand gap

Flagship report — December 2022

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COMMENTS

The top 11 causes of poverty around the world
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The top 11 causes of poverty around the world

Learn more about the causes of poverty — and how we're solving them

2. Conflict

3. Hunger, malnutrition, and stunting

4. Poor healthcare systems — especially for mothers and children

5. Little (or zero) access to clean water, sanitation, and hygiene

6. Climate change

How climate change keeps people in poverty

7. Lack of education

8. Poor public works and infrastructure

9. Global health crises including epidemics and pandemics

The crisis in Kenya: Climate, COVID, and hunger

10. Lack of social support systems

11. Lack of personal safety nets

Solutions to Poverty to Get Us To 2030

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Extreme Poverty and Hunger: A Vicious Cycle

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The top 11 causes of poverty around the world

1. Inequality

2. Conflict

3. Hunger, malnutrition, and stunting

4. Poor healthcare systems — especially for mothers and children

5. Little (or zero) access to clean water, sanitation, and hygiene

6. Climate change

7. Lack of education

8. Poor public works and infrastructure

9. Global health crises including epidemics and pandemics

10. Lack of social support systems

11. Lack of personal safety nets

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Key Insights on Poverty

From $1.90 to $2.15 a day: the updated International Poverty Line

Global extreme poverty declined substantially over the last generation

Extreme poverty: how far have we come, how far do we still have to go?

The pandemic pushed millions into extreme poverty

Hundreds of millions will remain in extreme poverty on current trends

The rapid progress seen in many countries shows an end to poverty is possible

After 200 years of progress the fight against global poverty is just beginning

The history of the end of poverty has just begun

How much economic growth is necessary to reduce global poverty substantially?

Explore Data on Poverty

Where is this data sourced from?

About the comparability of household surveys

Income vs expenditure surveys

Other comparability issues

Global and regional poverty estimates

How does the data account for inflation and for differences in the cost of living across countries?

Absolute vs relative poverty lines

Does the data account for non-market income, such as food grown by subsistence farmers?

Research & Writing

$2.15 a day: the updated International Poverty Line

Global poverty over the long-run

How do we know the history of extreme poverty?

Breaking out of the Malthusian trap: How pandemics allow us to understand why our ancestors were stuck in poverty

The short history of global living conditions and why it matters that we know it