Poverty trap by definition is “any self-reinforcing mechanism which causes poverty to persist.” One of the starting points in this mechanism is “poor education,” where the unskillful and under educated people earn less. Thus, they are not able to afford good education for their children and therefore, the next generation remains unskilled and under educated. This cycle is vicious creating a bipolar society where one spectrum has educated people with high income, and the other, lesser paid illiterate people. The social division, caused by chance, is unfair; James Heckman (see J. Heckman, Giving kids a fair Chance, 2013) believes this mechanism has made “the accident of birth the “principal source of inequality” in America.
In contrast to Heckman’s point of view, another group of economists believes that the poverty trap theory is defunct. In their model of society there is no place for the poverty trap (see figure 1 (right)), while Heckman and other economists support the two-equilibrium theory (see figure 1 (left)). In Heckman’s model, people under a certain social level are trapped in a “bad equilibrium”. The implication of this model is to help people in poverty and prevent society from becoming bipolar.
As stated, one of the channels through which the poverty trap mechanism works is education. Children of families with high level of education are more likely to enter university; this can be proved by data of the university entrance exam (aka konkoor) in Iran. The university entrance exam in Iran, as in many other countries, is the sole criterion for student selection. Limited space and resources have restricted many talented and enthusiastic applicants seeking access to higher education. While the common entrance exam does have disadvantages and is held in just a few countries (Iran, Korea and China) however, the data is very useful for economists to make strong inferences. Below we have utilized this data to see if the educational poverty trap is working or not in Iran.
Students’ test score in ‘Konkoor’ is the most important ticket to enter the university. In order to enter an ‘open’ (Azad) university, one must get a test score of 7000 at least. In figure 2, test score density for students with illiterate parents (red line) and students with educated parents with academic degrees (green line) are shown. As shown in this figure, the number of students with test scores higher than 7000, in educated families is much higher than students with illiterate parents. (Density of students with illiterate parents declines rapidly as the score increases).This result is compatible with the poverty trap model - we will name it educational poverty trap in which society is divided into two groups: more educated and less educated. This division is inherited by the next generation, where on average, a child born in an educated family will more likely enter university, while students in less educated families are less likely to enter university and get the education he/she seeks. Isn’t this unfair?
Hinders
More than inequality, this division hinders economic development, since the talent of one group is not harnessed. So economists suggest helping “the trapped group” in the “bad” equilibrium to reach the “good” equilibrium group. But how should we help this group?
Following educational reforms, a quota system was introduced in Iran to allow preferential treatment to underprivileged students. Three regions have been created for university entry with a special quota of acceptance in each region for students from rural regions (therefore, more quotas for rural regions).
This is a good example of helping people trapped in “bad” equilibrium, since a bigger multiplier for families in rural regions is considered where parents are less educated. However, keeping the educational poverty trap model in mind, there should be no place for rules which allow students to seek a transfer to universities where their parents are members of the faculty!
