Oriana Bandiera, Robin Burgess, Anton Heil and Munshi Sulaiman

Published 18 February 2026

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Poverty traps are among the most influential yet elusive ideas in economics. This chapter reviews the challenges involved in identifying poverty traps and surveys the progress made over the past quarter century. It examines both individual and societal traps, and explores the links between them. Individual traps are feedback mechanisms that make poverty self-reinforcing. Societal poverty traps are interactions between workers or firms create complementarities and can lead to multiple equilibria at an aggregate level. We also discuss evidence on the mechanisms that underlie each of these traps. We highlight open questions and draw policy implications.