Leaving no one behind: Urban poverty traps in Sub-Saharan Africa

Despite considerable achievements in the reduction of poverty over the last decades,poverty remains conspicuously high and profound. While fast urban population growth, especially in Sub-Saharan Africa, has contributed to poverty reduction, new development challenges like the urbanisation of poverty emerge. This paper investigates the persistence of urban poverty within the theory of poverty traps among urban households in Nigeria and Tanzania. Using household panel data from the World Bank Living Standard Measurement Study, we test whether consumption-based poverty traps exist in these contexts. Our results show that initially poor households experience an increase in well-being over time, while richer households face a decline and remain vulnerable to falling back into poverty. However, a sticky consumption floor as well as divergence of the floor with the mean show that despite upward dynamics amongst the poor, some are being being left behind. Finally, we argue that improved urban data is needed to identify the vulnerable middle, and to design structural policies preventing them from falling back into poverty.

JEL Classification: I32, P25, E21

Keywords: urban poverty, poverty trap, Sub-Saharan Africa, consumption floor, social protection