Do Poverty Traps Exist in Uganda? Household Level Evidence from Panel Data

Abstract

This study aimed at providing new evidence on the existence of poverty trap among Uganda’s households using Uganda National Panel data. Evidence of the existence of a poverty trap is fundamental in guiding the development of sound policies and interventions targeted to assist in pulling households out of poverty trap. Analysis was based on two sets of panel data comprising 8,122 households from 3 waves (2009/2010-2011/2012) and 12,199 households from 4 waves (2013/2014-2019/2020). Using the PCA constructed asset index approach based on a parametric regression model, we show that a poverty trap exists. This is revealed by the negative quartic polynomial coefficients of the asset index and asset values (-0.004** & -0.010***) respectively. Bivariate level results confirm that 18% (1,314,000) of Uganda’s households are trapped in poverty. A comprehensive, well-structured, targeted asset accumulation and poverty trap reduction interventions including cash transfers, should be implemented by the government for poverty-trapped households.