Addressing social, psychological and economic barriers helps people out of extreme poverty

Why are people who live in poverty disproportionately affected by mental illness? We review the interdisciplinary evidence of the bidirectional causal relationship between poverty and common mental illnesses—depression and anxiety—and the underlying mechanisms. Research shows that mental illness reduces employment and therefore income, and that psychological interventions generate economic gains. Similarly, negative economic shocks cause mental illness, and antipoverty programs such as cash transfers improve mental health. A crucial step toward the design of effective policies is to better understand the mechanisms underlying these causal effects.

We present results from six randomized control trials of an integrated approach to improve livelihoods among the very poor. The approach combines the transfer of a productive asset with consumption support, training, and coaching plus savings encouragement and health education and/or services. Results from the implementation of the same basic program, adapted to a wide variety of geographic and institutional contexts and with multiple implementing partners, show statistically significant cost-effective impacts on consumption (fueled mostly by increases in self-employment income) and psychosocial status of the targeted households. The impact on the poor households lasted at least a year after all implementation ended. It is possible to make sustainable improvements in the economic status of the poor with a relatively short-term intervention.

We study how women's choices over labor activities in village economies correlate with poverty and whether enabling the poorest women to take on the activities of their richer counterparts can set them on a sustainable trajectory out of poverty. To do this we conduct a large-scale randomized control trial, covering over 21,000 households in 1,309 villages surveyed four times over a seven-year period, to evaluate a nationwide program in Bangladesh that transfers livestock assets and skills to the poorest women. At baseline, the poorest women mostly engage in low return and seasonal casual wage labor while wealthier women solely engage in livestock rearing. The program enables poor women to start engaging in livestock rearing, increasing their aggregate labor supply and earnings. This leads to asset accumulation (livestock, land, and business assets) and poverty reduction, both sustained after four and seven years. These gains do not crowd out the livestock businesses of noneligible households while the wages these receive for casual jobs increase as the poor reduce their labor supply. Our results show that (i) the poor are able to take on the work activities of the nonpoor but face barriers to doing so, and, (ii) one-off interventions that remove these barriers lead to sustainable poverty reduction.