The poverty trap: a case study of Thai farmers

This article theoretically proves that a poverty trap problem is a result of endogenous fertility behaviour. The theoretical results were supported by empirical evidence from Thai farmer census data and a socioeconomic survey. Thai farmers tend to have a larger family size and smaller household incomes than nonfarmer households. Thai farmers are not covered by the social security programme and, thus, they have to rely more on intergenerational transfer from their children during retirement years. They fall into the poverty trap because the consumption level of their household increases as the number of children increases. Current government policies for Thai farmers only focus on providing more lending to farmers without saving incentives. As a result, the farmers' debt levels have become increasingly high. The government also provides the farmers with a debt suspension programme, which can have a long-term distortion effect on prudent agricultural lending activities. This article suggests that the poverty trap problem and distortion effect can be alleviated through a policy revision that could close the gap in the current farmer assistance programmes with a saving incentive and risk management scheme. In the long run, Thai farmers should be able to rely more on their own safety net than on government support.