thesis statement about the poverty

Poverty: The Main Causes and Factors Essay

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At the moment, there is a great deal of debate in the scientific community as to what exactly should be considered poverty. Because of the constant process of societal development, the concept of poverty changes rapidly, adapting to the new standards of modern human life. Thus, it is impossible to determine the causes of poverty with absolute precision. Still, a range of empirical knowledge about humanity allows identifying three groups of causes most likely to lead people and entire societies to poverty. Thus, this paper’s central thesis is that a person’s poverty can be influenced not only by the characteristics of his behavior but also by the circumstances in which he was born. These may include political and economic factors, which often cause poverty for the individual and the whole society.

There are various theories that summarize the causes of poverty. Brady (2019) writes that all theories about the emergence of poverty can be divided into three conditional groups: structural, behavioral, and political. The behavioral factor refers to the set of qualities of an individual that impede his financial well-being. These may include various addictions, insufficient level of education, a person’s worldview, and other reasons. Structural factors include labor market conditions, demographic context, and other socio-economic circumstances. An example is the increase in poverty associated with the development of the COVID-19 pandemic. According to the World Bank (2022), declining incomes, job losses and work stoppages during the pandemic have significantly reduced household incomes. Finally, political causes refer to the policies pursued by the government and its institutions, which hinder the economic well-being of the citizen and society.

Observing the behavioral causes of poverty, it is worth noting several vital factors highlighted by scholars. Brown (2018) writes that given the same circumstances, some people may become more prosperous than others, which may be due to a number of their behavioral characteristics. Various studies have tested the correlation between different measures of human character and one’s financial situation. Still, one can assume the deductive argument that greater diligence, striving for growth and development, ambition, and other personality traits can affect whether or not one will be poor. According to behavioral theory, if people become poor, then they themselves are responsible for this, since their individual shortcomings, laziness or lack of qualifications necessary for society lead to the impossibility of finding a job. Mavroudeas et al. (2019) note that the character traits of the unemployed can vary widely, from a lack of hard work or good morals to a low level of education or competitive market skills. Moreover, it is worth considering that some illnesses prevent a person from reaching their goals. Such illnesses include disabilities, congenital problems, and other factors affecting a person’s future expenses and employment.

The next group of reasons is related to the demographic characteristics of the region and the conditions of the labor market there. Fewer children are born in countries where the second demographic transition has occurred. It allows parents to concentrate all their efforts on upbringing, education, and health. In less developed countries or countries with higher fertility rates, parents have to rely on the number of their children. High infant mortality forces parents to have more children than their financial situation can afford, which is also a significant cause of poverty in the developing world.

Several political, social, historical, and economic factors prevent certain societies, and therefore most of their members, from crossing the poverty threshold. Being in a prolonged military conflict, a severe financial crisis, and insufficient valuable resources for economic development are important causes of poverty for many African and Asian countries (Wijekoon, 2021). All these factors harm the region’s economic development, creating several behavioral and structural problems. For example, higher levels of unemployment often lead to problems with alcohol addiction in society. It is also worth noting that Greve (2019) identifies certain categories of citizens who, due to demographic, social and economic reasons, find themselves in a state of poverty. These include the disabled, pensioners, people with a high incidence of disease, and those with a large number of dependents. Thus, the cause of poverty is a person’s belonging to these groups.

The political reasons also include a high level of state corruption, leading to an unfair allocation of resources. In situations where a limited number of people own most of the country’s natural reserves, resources, and finances, essential to discuss unnatural causes of regional poverty caused by the incompetent work of the state apparatus. Correct distribution of resources in the economy, which promotes competition between businesses and individuals, can lead a country to develop and reduce the number of poor people.

Thus, many causes of poverty affect individuals and society in different ways. Although the definition of poverty is constantly changing and varies from country to country, there are several universal reasons for the poverty of some and the wealth of others. These reasons are historical, political, demographic, and others, as many factors, influence a person’s financial situation. Each of these causes can be a consequence of the previous one, just as alcohol addiction can follow a wage fall or an increase in unemployment.

Brady, D. (2019). Theories of the Causes of Poverty. Annual Review of Sociology , 45 , 155-175.

Brown, U., & Long, G. (2018). Poverty and welfare. In Social Welfare (pp. 19-34). Routledge.

Greve, B. (2019). Poverty: The Basics (1 st ed.). Routledge.

Mavroudeas, S., Akar, S., & Dobreva, J. (2019). Globalization, poverty, inequality, & sustainability. IJOPEC.

The World Bank. (2022). Poverty. The World Bank. Web.

Wijekoon, R., Sabri, M. F., & Paim, L. (2021). Poverty: A literature review of the concept, measurements, causes and the way forward. International Journal of Academic Research in Business and Social Sciences , 11 (15), 93-111.

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Poverty and Its Impact on Students’ Education

The purpose of this position statement is to highlight the impact poverty has on students and their ability to succeed in the classroom as well as offer policy recommendations on how to best support the academic, social, emotional, and physical success of these students.

Each day countless students come to school, each with their own set of unique gifts, abilities, and challenges. Recent data has found that students living in poverty often face far more challenges than their peers. According to the National Center of Education Statistics, 19 percent of individuals under 18 lived in poverty during the 2015–16 school year. Furthermore, 24.4 percent of students attended high-poverty schools during that same year. The data also show that higher percentages of Hispanic, African-American, American Indian/Alaska Native, and Pacific Islander students attended high-poverty schools than white students, underscoring that poverty is also an issue of equity that must be addressed.

These data show the reality of what our public education system is facing today. Nearly one-fifth of students nationwide are either living in poverty, attending a high-poverty school, or both. Poverty negatively impacts students in a variety of ways within K–12 education and beyond. This can be through a variety of different factors that are often symptoms of poverty, like health issues stemming from a nonnutritional diet, homelessness, lack of food, or the inability to receive medical treatment for illnesses. These factors often place more stress on a student, which can negatively impact the student’s ability to succeed in a school.

Students living in poverty often have fewer resources at home to complete homework, study, or engage in activities that helps equip them for success during the school day. Many impoverished families lack access to computers, high-speed internet (three-fourths of households currently have access to high-speed broadband), and other materials that can aid a student outside of school. Parents of these families often work longer hours or multiple jobs, meaning they may not be available to assist their children with their schoolwork.

Furthermore, in many high-poverty school districts, resources are sorely lacking in schools. Nearly every state has its own division of funding for school districts and education based on property taxes. Unfortunately, this system unfairly affects individuals living in poverty and the students attending school in those areas. Because property taxes are often much lower in high-poverty areas, schools in those areas receive much less than their more affluently-located counterparts. Recent data from the U.S. Department of Education state that 40 percent of high-poverty schools are not getting a fair share of state and local funds. This often leaves schools with limited budgets to address a multitude of issues, including hiring educators, updating resources for students, preparing students for postsecondary education or the workforce, dealing with unsafe infrastructure, and much more. There are often instructional gaps for those attending high-poverty schools as well. Data from the 2015–16 National Teacher and Principal Survey show that students from low-income families “are consistently, albeit modestly, more likely to be taught by lower-credentialed and novice teachers” (Garcia and Weiss). Research has also shown that many teachers in high-poverty schools are inexperienced and often less effective than their more experienced peers who are often targeted for hire by higher-income schools and districts. The lack of high-quality instruction serves to only further separate academic achievement levels for students in high-poverty schools from peers in high-income schools or districts.

Guiding Principles

• All students, regardless of income level or background, are capable of and should receive the support and resources necessary for success.
• Students from low-income families often face additional barriers that can impede academic success compared to their peers from higher-income households.
• Principals provide leadership for instilling a culture of success and support within their school and should strive to provide each student with the supports necessary to achieve this success. Principals should strive to achieve this through all available avenues, including through strategic partnerships.
• The 2015  Professional Standards for Educational Leaders  state that effective educational leaders strive for equity of educational opportunity and culturally responsive practices to promote each student’s academic success and well-being.
• NASSP has previously adopted position statements on the  achievement gap  and  preparing all students for postsecondary success  that offer policy recommendations to promote equitable support for all students and adequate preparation to enter the workforce or a postsecondary institution following high school.
• NASSP developed the Building Ranks™ framework to reflect the principal’s responsibility for building culture and leading learning to foster lifelong success for each child in a rapidly changing world.

Recommendations

Recommendations for Federal Policymakers

• Advance policies that incentivize and support well-trained teachers, principals, and other educators to work and remain in high-poverty schools.
• Provide additional federal funds and resources for programs, such as Title I and the Supplemental Nutrition Assistance Program, aimed at supporting students from low-income families.
• Ensure federal funds are divided equitably so that high-poverty districts are guaranteed a fairer share of federal dollars.
• Invest in school leadership required to hire and retain well-trained school leaders, recognizing the critical role principals play in establishing a culture and learning environment that students need to be successful in a global society.
• Prioritize school improvement strategies—such as community schools—that include resources and supports to address the barriers poverty creates to student success.
• Provide additional resources and invest in programs for students from low-income families to enter postsecondary education or the workforce.
• Enact legislation aimed at improving school infrastructure, with a particular focus on buildings in high-poverty districts that pose potential health threats to students, educators, and other faculty in the school.
• Expand the maximum allowance of Pell Grants, and share information with states, local education agencies, and universities on application eligibility and processes.
• Fully fund federal programs that increase connectivity for all students, like the E-Rate Program which provides discounted telecommunications services to schools.

Recommendations for State Policymakers

• Ensure state funding formulas are properly balanced so all districts receive an equitable and sufficient share of funds based on student poverty levels, property tax revenue per district, or other evidence-based indicators of poverty.
• Reevaluate state investments in education to ensure school districts are receiving the funds necessary to promote student success.
• Prioritize school improvement strategies—such as community schools—that include resources and supports to address the barriers to student success that poverty creates.
• Invest in curriculum that prepares students for 21st-century employment and participation in a democracy. This will prepare students for life beyond secondary education and better enable them to be successful in the workforce and financially secure.
• Prioritize and invest in state financial aid for school districts based on need instead of merit, which disproportionately helps high-income and white students.
• Make investments over a long-term basis rather than short term, as long-term investments have a proven track record of improving high-poverty school districts.

Recommendations for District Leaders

• Make sure that your district and school funding systems ensure equal access to core educational services for each student in K–12 education.
• Ensure that school funding systems provide additional resources for low-income students to ensure they have a more level playing field for achieving success.
• Use per-pupil expenditure (PPE) data to evaluate district funding decisions and make changes based on this data when inequities are presented.
• Support ongoing learning for school leaders, recognizing that their role is changing and that the demands of a high-poverty schools are expanding, requiring continual development.
• Advance policies that ensure highly-qualified educators are working in high-poverty schools.
• Urge state policymakers to reevaluate unfair funding practices that negatively impact high-poverty districts.

Recommendations for School Leaders

• Instill a culture of growth and success in your school that effectively educates all students about the opportunities available to them following secondary education.
• Provide benefits and resources within schools to all students so those living in poverty have the necessary supports to succeed, with the assistance of outside partners such as internet providers, food suppliers, or healthcare organizations. Examples include: free breakfast, extended library or lab hours after school, allowing students to take home wifi hotspots, etc.
• Provide professional development for teachers and staff to assist them in working effectively with students in poverty and address the impact of associated trauma and chronic stress.
• Provide students with access to college admissions, scholarships, financial aid information, and personnel to help students with these discussions so students are properly educated on postsecondary education opportunities.
• Ensure that budget discussions and requests are conducted in a transparent process that allows for input from a variets of groups and stakeholders in the school community.

Amerikaner, A., & Morgan, I. (2018, February 27). Funding gaps 2018: An analysis of school funding equity across the U.S. and within each state. Retrieved from  https://edtrust.org/resource/funding-gaps-2018/ .

Carey, K., & Harris, E. (2016). It turns out spending more probably does improve education. Retrieved from  https://www.nytimes.com/2016/12/12/nyregion/it-turns-out-spending-more-probably-does-improve-education.html?_r=0 .

Carr, S. (2013, February 26). The real reasons many low-income students don’t go to college. Retrieved from  https://hechingerreport.org/the-real-reasons-many-low-income-students-dont-go-to-college/ .

College for America. (2017, June 7). Addressing the college completion gap among low-income students. Retrieved from  https://collegeforamerica.org/college-completion-low-income-students/ .

Dynarski, M. (2017, March 1). It’s not nothing: The role of money in improving education. Retrieved from  https://www.brookings.edu/research/its-not-nothing-the-role-of-money-in-improving-education/ .

Garcia, E., & Weiss, E. (2019, March 26). The teacher shortage is real, large and growing, and worse than we thought: The first report in ‘The Perfect Storm in the Teacher Labor Market’ series. Retrieved from https://www.epi.org/publication/the-teacher-shortage-is-real-large-and-growing-and-worse-than-we-thought-the-first-report-in-the-perfect-storm-in-the-teacher-labor-market-series/.

Jensen, E. (2013, May). How poverty affects classroom engagement. ASCD. Retrieved from  http://www.ascd.org/publications/educational-leadership/may13/vol70/num08/How-Poverty-Affects-Classroom-Engagement.aspx .

Johnston, K. (2019, June 20). 7 ways poverty affects education. Retrieved from  https://moneywise.com/a/ways-poverty-affects-education .

Jackson, K., Johnson, R., & Persico, C. (2016). The effects of school spending on education and economic outcomes: Evidence from school finance reforms.  The Quarterly Journal of Economics 131 (1), pp. 157–218.

LaFortune, J., Rothstein, J., & Schanzenbach, D.W. (2016).  School Finance Reform and the Distribution of Student Achievement.  National Bureau of Economic Research, Working Paper 22011, February 2016.

Martin, C., Boser, U., Benner, M., & Baffour, P. (2018, November 13). A quality approach to school funding. Center for American Progress. Retrieved from https://www.americanprogress.org/issues/education-k-12/reports/2018/11/13/460397/quality-approach-school-funding/

McFarland, J., Hussar, B., Wang, X., Zhang, J., Wang, K., Rathbun, A., Barmer, A., Forrest Cataldi, E., and Bullock Mann, F. (2018).  The Condition of Education 2018  (NCES 2018-144). U.S. Department of Education. Washington, DC: National Center for Education Statistics. Retrieved from https://nces.ed.gov/pubs2018/2018144.pdf.

National Association of Secondary School Principals. (2019, March 19). Using PPE data to advocate for your school.  School of Thought  blog. Retrieved from http://blog.nassp.org/2019/03/22/using-ppe-data-to-advocate-for-your-school/.

Parrett, W., & Budge, K. (2016, January 13). How does poverty influence learning? Retrieved from  https://www.edutopia.org/blog/how-does-poverty-influence-learning-william-parrett-kathleen-budge .

Pascoe, M.C., Hetrick, S.E. & Parker., A.G. (2019). The impact of stress on students in secondary school and higher education.  International Journal of Adolescence and Youth , DOI:  10.1080/02673843.2019.1596823 .

Taylor, K. (2019, July 25). Poverty’s long-lasting effects on students’ education and success. Retrieved from  https://www.insightintodiversity.com/povertys-long-lasting-effects-on-students-education-and-success/ .

Turner, C., Khrais, R., Lloyd, T., Olgin, A., Isensee, L., Vevea, B., & Carsen, D. (2016, April 18). Why America’s schools have a money problem. Retrieved from  https://www.npr.org/2016/04/18/474256366/why-americas-schools-have-a-money-problem .

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‘Poverty Is The Parent Of Revolution And Crime’ – Aristotle

• September 15, 2020
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Poor countries are disproportionately affected by domestic war and other forms of conflict. The World Bank acknowledges that “on average, a country that experiences major violence has a poverty rate significantly higher than a country that had no violence.” The ten poorest countries, as reported by the World Bank in 2019, have a GDP per capita of less than USD 600. The list includes war-ridden countries such as Sudan, Afghanistan, the Central African Republic, and the Democratic Republic of Congo. Of course, there are outliers – Malawi and Sierra Leone, for example, ranked 59th and 46th, respectively, on the Global Peace Index. The index weighs factors including a country’s level of violent crime, political terror, conflicts fought, and percentage of displaced people. Of the top ten richest countries represented on the Global Peace Index, all but one ranked in the top 27th. Four ranked within the top ten, with Iceland placing 1st. This stark contrast paints a harsh picture of the relationship between wealth and peace.

The first of the United Nations Sustainable Development Goals is to “end poverty in all its forms everywhere.” The World Bank reported a decrease in global poverty of approximately 26% between 1990 and 2015. These years saw nearly 1.1 billion people leave extreme poverty (began earning more than USD 1.90 a day). Increased productivity and the expansion of the middle class are largely responsible for this reduction in global poverty.

However, COVID-19 raises serious concerns that this progress may be reversed. It is likely that those who can least afford to weather it will feel the global recession the most. The United Nations University World Institute for Development Economics Research predicts that the pandemic is likely to increase global poverty by 500 million people – 8% of the global population. Further, the World Bank estimates that between 40-60 million people may fall into the category of extreme poverty.

Not enough is being done to eradicate poverty and create a more equitable distribution of resources. According to the United Nations, nearly one in every ten employed workers lived in extreme poverty in 2018. Approximately 20,000 people die every day from malnutrition when the earth has enough resources to feed the world one and a half times over. In 2017, Oxfam, a charitable organization, revealed that the “world’s richest 1% get 82% of the [world’s] wealth.” Oxfam also claimed that the 22 wealthiest men on earth have more wealth than all the women in Africa – of which there are over 500 million.

The UN Millennium Project found that poor countries are “more likely to have weak governments.” Weak government institutions positively reinforce poverty because state institutions rely on public funding to maintain public goods, such as education, trade regulations, the justice system, police forces, and healthcare. When state institutions are insufficiently funded, the goods they can provide to the public are limited. In 2000, the World Health Organization ranked 191 countries’ health system performance. In that same year, the ten countries with the lowest GDP per capita all ranked lower than 143 rd place. Myanmar and Sierra Leonne ranked 190 th and 191 st , respectively. Without the resources to enable taxpayers to prosper, public institutions further diminish their source of income, trapping poor countries in a vicious cycle.

“Poor and hungry societies are much more likely than high-income societies to fall into conflict over scarce vital resources, such as watering holes and arable land,” says the UN Millennium Project. In 1997, the Democratic Republic of Congo (DRC) hurdled into a civil war. In that same year, DRC also experienced its lowest GDP per capita (USD 140) since it gained independence in 1960. Militia groups and the country’s military fought for control over the country’s east, and although the war technically ended in 2004, internal conflict continues. Many militia groups extract the county’s natural resources, particularly coltan, which is plentiful in DRC. Tantalum, which is extracted from coltan, is a common – and, therefore, highly sought-after – component in electrical devices like mobile phones. Guerillas have exploited these resources to fund weapon purchases. In 2012, the United States implemented the Dodd-Frank Act to ban companies from using “conflict materials” like tantalum. However, this had the unintended consequence of increasing unemployment in the industry. As their poverty worsened, many of the newly unemployed workers were driven to join militia groups instead.

Poverty is not the only cause of war. A country’s socio-political environment, its history, or its geography may all be factors. Wars also often have a religious or ethnic component. Whether poverty is a cause of war or merely a symptom, it reinforces the likelihood of internal conflict.

The cost of poverty is too high. Poverty is intolerable on its own. Paired with an increased likelihood of war, it is beyond unjustifiable. It is relatively easier for developed countries to look inward and prioritize inequalities at home. However, it is a global responsibility to eliminate all forms of poverty, everywhere. To eradicate poverty, world leaders must first let go of their nationalistic ideologies. Barack Obama once said, “As the wealthiest nation on Earth, I believe the United States has a moral obligation to lead the fight against hunger and malnutrition, and to partner with others.” This “we are all in this together” philosophy will be essential if the world has any hope of achieving the United Nation’s target of eliminating extreme poverty by 2030.

Changing the world’s wealth distribution will rely heavily on rich countries. The developed world holds an inequitable amount of wealth. Free from political or religious motives, privileged countries should work collaboratively to raise the standard of living in the poorest countries. This will mean less money to spend on domestic issues. However, in perspective, it makes sense for the world to focus its resources on those who need them most. This is not to say developed countries should not spend public money at home – they should. It is to say that where first world countries can go without, they should, to help their neighbors. The biggest barrier to this approach is the peoples’ capacity for compassion. Compassion will dictate the sacrifices people are willing to endure. In turn, this will influence the countries’ political will to substantially help those in need.

Billionaires are a first world problem, but they affect us all. A large proportion of the world’s wealth is heavily concentrated on a small percentage of the upper class. According to an analysis by Forbes, the top 10 richest men hold more wealth than many countries, the likes of Saudi Arabia, Switzerland, Turkey, and Belgium included. One person should not legally be allowed to have more money than they can spend, while another does not have enough to eat. Ending the era of billionaires would drastically narrow the income inequality gap.

Beyond all else, people must believe they can lift the world out of poverty. The world has already achieved more than it thought possible. International newspaper The Economist reported in 2017 that “someone escapes extreme poverty every 1.2 seconds.” In 2015, 1.1 billion fewer people were living in extreme poverty than there were in 1950. That should be evidence enough that change is possible.

Eradicating global poverty is not insurmountable. It will be hard. But it is necessary.

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Home — Essay Samples — Law, Crime & Punishment — Criminal Behavior — Poverty Is The Root Of Crime

How Poverty is The Main Cause of Crime

• Categories: Criminal Behavior

About this sample

Words: 593 |

Published: Dec 16, 2021

Words: 593 | Page: 1 | 3 min read

• brooklyn eagle. (2019,October 15). New York's most desperate caught up in 'crimes of poverty'. Retrieved from https://brooklyneagle.com/articles/2019/10/15/new-yorks-most-desperate-caught-up-in-crimes-of-poverty/
• Ginni Correa. (2020,june 18). Addiction center. Retrieved from https://www.addictioncenter.com/addiction/low-income-americans/
• OSAC. (6/18/2019). Venezuela 2019 Crime & Safety Report. Retrieved from https://www.osac.gov/Country/Venezuela/Content/Detail/Report/b0933dac-4154-4dc2-89c1-160ca3b2c4c2
• Tom Mack. (3 JAN 2020). Leicestershire live . Retrieved from https://www.leicestermercury.co.uk/news/leicester-news/man-stealing-metal-feed-family-3699993

Should follow an “upside down” triangle format, meaning, the writer should start off broad and introduce the text and author or topic being discussed, and then get more specific to the thesis statement.

Provides a foundational overview, outlining the historical context and introducing key information that will be further explored in the essay, setting the stage for the argument to follow.

Cornerstone of the essay, presenting the central argument that will be elaborated upon and supported with evidence and analysis throughout the rest of the paper.

The topic sentence serves as the main point or focus of a paragraph in an essay, summarizing the key idea that will be discussed in that paragraph.

The body of each paragraph builds an argument in support of the topic sentence, citing information from sources as evidence.

After each piece of evidence is provided, the author should explain HOW and WHY the evidence supports the claim.

Should follow a right side up triangle format, meaning, specifics should be mentioned first such as restating the thesis, and then get more broad about the topic at hand. Lastly, leave the reader with something to think about and ponder once they are done reading.

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9.4 Annotated Student Sample: “Rhetorical Analysis: Evicted by Matthew Desmond” by Eliana Evans

Learning outcomes.

By the end of this section, you will be able to:

• Identify the ways a student writer has analyzed the rhetorical strategies in a persuasive text.
• Demonstrate critical thinking and problem-solving when reading a rhetorical analysis.

Introduction

Matthew Desmond (b. 1979 or 1980) is a sociology professor at Princeton University . He has published four books, each addressing issues of poverty or racial inequality in American life. He has been recognized by the Politico 50 list as an important contributing voice to national political debate. In the analysis that follows, student Eliana Evans examines Desmond’s work from a rhetorical perspective.

Living by Their Own Words

Story as persuasion.

public domain text Imagine it’s Friday—payday. One American worker picks up her check for $637. Now, imagine that $550 will go toward rent, leaving only a small amount for everything else. The remaining $87 must be divided among food, utilities, childcare, and medical treatment. Unfortunately, many of the nation’s poor don’t have to imagine this troubling scenario because this is their reality. In his book Evicted: Poverty and Profit in the American City , ethnographer and author Matthew Desmond follows eight poor families in Milwaukee, Wisconsin, as they struggle to establish and maintain one of humanity’s most basic needs: housing. As an ethnographer, Desmond gathers research to promote the study and documentation of human culture: how people live under all kinds of conditions. end public domain text

annotated text Ethos. By mentioning Desmond’s qualifications as an ethnographer, Eliana Evans appeals to ethos: Desmond is an authority whose opinions can be taken seriously. end annotated text

annotated text Introductory Anecdote. By beginning with a real-life example and addressing the reader directly, the writer immediately emphasizes Desmond’s hard-hitting point. This strategy engages readers from the start. end annotated text

public domain text Living and working in the typical mid-size American city of Milwaukee in the early 2000s, Desmond highlights the source of the cyclical poverty he observes around him. He concludes that unstable housing is “deeply . . . implicated in the creation of poverty” (5). end public domain text

annotated text Thesis Statement. The writer notes that Desmond offers his thesis statement, or the main point of his argument, without delay, building off the specific example in the introduction. end annotated text

public domain text Throughout his book, Desmond explains that inflated rents and evictions— the forced loss of housing—create power imbalances between landlords and tenants. Legal and economic systems rigged against the poor are to blame for creating an unbreakable cycle of poverty for renters. To advance his deductive argument, Desmond largely employs emotional anecdotal evidence, introducing readers to the real-life circumstances of eight families, thus using pathos to reach his readers. To reinforce this anecdotal evidence, he also employs logical statistical evidence as well as emotional allusions to the nation’s founding principle of equality. end public domain text

public domain text To bring his book to life, Desmond uses many quotations from the people he portrays in the cycle of poverty. Early in the book, he describes the life of Sherrena Tarver, an entrepreneur landlord who owns and manages numerous properties and has to evict nonpaying tenants in the most difficult circumstance. At one point, she faces a tough decision about Lamar, a legless man who occupies an apartment where he helps neighborhood boys stay in school and control their lives. He simply cannot meet his financial responsibilities, and Sherrena is torn between helping him and protecting her own bottom line. “I guess I got to stop feeling sorry for these people because nobody is feeling sorry for me,” she states (11). She will have to pay her own mortgage on the property. No connection exists if others do not feel sorry for Sherrena, who has to face her own inner conflict about Lamar. end public domain text

annotated text Ethos, Pathos, and Logos. Desmond speaks with authority as someone who cares deeply about the injustices of the housing situation. Evans notes that Desmond also relies on emotional and logical thought and examples, and she shows this in his quotations. end annotated text

public domain text Although his book identifies unstable housing as a cause of poverty, Desmond writes for the purpose of creating empathy in voters and establishing facts that policy makers cannot ignore to remedy the housing trap. The moving description of eviction and its effects allows readers to fully appreciate his proposed solutions. As a main point, Desmond advocates for legislation that would establish a universal housing voucher program combined with government regulation to stabilize rents. He explains that voucher “programs lift roughly 2.8 million people out of poverty” each year (302). If these programs were expanded and supported by laws that would prevent landlords from establishing exploitative rents, many more people could be helped. Desmond hopes to convince voters who have been moved by his ethnographic discussion to elect candidates who are serious about ending poverty and creating a more equal America. end public domain text

annotated text Language Use. Evans uses the phrase “as a main point” to emphasize to readers that Desmond strongly believes in the voucher system. end annotated text

public domain text In support of his argument, Desmond presents multiple anecdotal examples to illustrate the root of the cyclical poverty his subjects face. For example, in Chapter 16, Kamala, a middle-aged mother of three, leaves her children for one evening in the care of Devon, their father. Later, a fire caused by a lamp kills their eight-month-old daughter. The apartment is uninhabitable, but the landlord, Sherrena, keeps the month’s rent. The police report that the three children, abandoned by Devon, were alone in the apartment. The high cost of monthly rent leaves Kamala with few options for proper childcare, and without childcare, she has few options for employment. The exploitation by landlords such as Sherrena only intensifies the tenant’s poverty. Kamala, who still has two children to support, is left with no home, no money, and little means of survival. Her story, and the stories of the many others Desmond chronicles, supports the argument that unstable housing is a cause of poverty, not a condition. end public domain text

annotated text Examples and Pathos. Desmond’s discussion gains emotional strength from the story of a child’s needless death. end annotated text

annotated text Pathos and Logos. The logic of the situation is that a family must endure hardship with little support. The overwhelming need and the trap of poverty in poor housing make for strong logical and emotional persuasion. end annotated text

public domain text Desmond relays the stories of Kamala and others to generate empathy with readers. These stories create emotional appeal in that they allow readers to experience the spiraling effects of poverty along with people they come to care about. Indeed, Desmond relies on the intensity of Kamala’s story to give poverty a face. Kamala is no longer a nameless, faceless statistic. She is a real woman who experiences the loss of a child as a result of circumstances beyond her control. Kamala’s story helps break the preconception that poor people are lazy and make individual choices to perpetuate their own poverty. Her situation illustrates a cycle of unbreakable tragedy and poverty that begins with her inability to secure affordable and stable housing. The details of her story make it hard for the public to ignore. end public domain text

public domain text Desmond does not rely on anecdotal evidence alone. He also includes statistical evidence to support his argument. end public domain text

annotated text Logical Evidence. The writer notes Desmond’s use of quantitative evidence—an appeal to logic. Readers are eager to learn facts that will strengthen the impact of Desmond’s argument. end annotated text

public domain text In the prologue, Desmond explains that Arleen pays “88 percent of [her] $628-a-month welfare check” in rent (3). This disproportionate sum creates a situation in which “1 in 8 poor renting families nationwide [are] unable to pay all of their rent” (5). In Milwaukee, “landlords evict roughly 16,000 adults and children each year” (4). Such numbers go beyond empathy and instead appeal to logic. Policy makers are likely to reject the idea of drafting laws to relieve poverty based on feelings or empathy. Statistics, however, provide hard numbers that are not subject to debate and that reinforce the need for logical and realistic solutions. Desmond also notes that eviction and its effects have been vastly ignored by sociologists. These statistics fight preconceptions such as Why don’t poor people just get jobs? In addition, by using personification, Desmond explains that poverty is a formidable enemy that a minimum-wage job cannot defeat. end public domain text

annotated text Logos. As a skilled writer, Desmond knows that if political action is called for, he will have to present a heavy dose of facts and numbers. Evans notes that readers are more likely to be persuaded by a combination of different rhetorical strategies, such as pathos and logos. end annotated text

annotated text Personification. Evans notes that Desmond uses figurative language to personify the idea of poverty, calling it “a formidable enemy.” end annotated text

public domain text Finally, Desmond appeals to his readers’ sense of right and wrong when he asks a key rhetorical question: Is housing a fundamental American right? If readers answer “yes,” then it is un-American to systematically lock poor people away from the founding ideals of the country through housing, banking, and legal systems that work to guarantee their poverty. The American dream is one of equal opportunity. Yet, despite the constitutional guarantee of civil rights, the poor people who struggle to maintain housing in Desmond’s Milwaukee are further separated from the American dream by race. end public domain text

public domain text For example, in Chapter 3, Desmond describes the segregation that has long plagued Milwaukee: despite the “open housing measure” guaranteed by “the 1968 Civil Rights Act,” Milwaukee “remain[s] one of the most racially divided cities in the nation” (34). The housing divide in Milwaukee not only keeps poor people from achieving the American dream of stable and affordable housing, but it also supports a system of segregation that goes against the founding ideal of equality. end public domain text

annotated text Logos and Pathos. Desmond addresses the issue of right vs. wrong. He attempts to persuade readers by offering examples that make them think about the legal aspects of housing (logos) and the effects that deprivation have on individuals (pathos) . end annotated text

public domain text Desmond’s argument is enticing in many ways. However, critics point out that he proposes a solution that fixes only the short-term problem of sustaining stable housing with a universal voucher program that provides no incentive for work. The long-term problem, which Desmond never addresses, would have to include a solution that would raise a massive number of people out of poverty by enabling them to sustain reliable housing, along with other living expenses, without relying heavily on government assistance. Vouchers may begin to eat away at the root of poverty, but they are a short-term, rather than a long-term, fix. end public domain text

annotated text Addressing Counterclaims. Evans is careful to include some possibly negative views of Desmond’s main points to indicate that she has considered all sides before reaching a final verdict on the validity of his argument . end annotated text

public domain text In the end, though, Desmond’s argument is effective because he provides ample evidence with varying appeals to support his claims. The use of anecdotes allows readers to feel the pain of poverty. Desmond’s statistical research shows logical reasons to end poverty through universal housing. The mentions of founding principles such as equality show that readers have a moral obligation as Americans to participate in a solution to the housing crisis. end public domain text

public domain text Although much of Desmond’s book relies on its anecdotal evidence and emotional appeal, it is his logic that ultimately proves convincing. He identifies a tangible cause of poverty, then offers an equally tangible solution to the problem he describes. If having stable and affordable housing will help end poverty and thus improve society, then the government should provide this through vouchers and rent regulation. end public domain text

annotated text Conclusion and Thesis Statement Reaffirmed. Evans praises Desmond for his rhetorical ability to appeal to readers in different ways. She claims that his logical approach, presenting facts and figures along with emotional appeals, should be enough to convince the government to act. end annotated text

Desmond, Matthew. Evicted: Poverty and Profit in the American City. Broadway Books, 2016.

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Thesis Statements

What this handout is about.

This handout describes what a thesis statement is, how thesis statements work in your writing, and how you can craft or refine one for your draft.

Introduction

Writing in college often takes the form of persuasion—convincing others that you have an interesting, logical point of view on the subject you are studying. Persuasion is a skill you practice regularly in your daily life. You persuade your roommate to clean up, your parents to let you borrow the car, your friend to vote for your favorite candidate or policy. In college, course assignments often ask you to make a persuasive case in writing. You are asked to convince your reader of your point of view. This form of persuasion, often called academic argument, follows a predictable pattern in writing. After a brief introduction of your topic, you state your point of view on the topic directly and often in one sentence. This sentence is the thesis statement, and it serves as a summary of the argument you’ll make in the rest of your paper.

What is a thesis statement?

A thesis statement:

• tells the reader how you will interpret the significance of the subject matter under discussion.
• is a road map for the paper; in other words, it tells the reader what to expect from the rest of the paper.
• directly answers the question asked of you. A thesis is an interpretation of a question or subject, not the subject itself. The subject, or topic, of an essay might be World War II or Moby Dick; a thesis must then offer a way to understand the war or the novel.
• makes a claim that others might dispute.
• is usually a single sentence near the beginning of your paper (most often, at the end of the first paragraph) that presents your argument to the reader. The rest of the paper, the body of the essay, gathers and organizes evidence that will persuade the reader of the logic of your interpretation.

If your assignment asks you to take a position or develop a claim about a subject, you may need to convey that position or claim in a thesis statement near the beginning of your draft. The assignment may not explicitly state that you need a thesis statement because your instructor may assume you will include one. When in doubt, ask your instructor if the assignment requires a thesis statement. When an assignment asks you to analyze, to interpret, to compare and contrast, to demonstrate cause and effect, or to take a stand on an issue, it is likely that you are being asked to develop a thesis and to support it persuasively. (Check out our handout on understanding assignments for more information.)

How do I create a thesis?

A thesis is the result of a lengthy thinking process. Formulating a thesis is not the first thing you do after reading an essay assignment. Before you develop an argument on any topic, you have to collect and organize evidence, look for possible relationships between known facts (such as surprising contrasts or similarities), and think about the significance of these relationships. Once you do this thinking, you will probably have a “working thesis” that presents a basic or main idea and an argument that you think you can support with evidence. Both the argument and your thesis are likely to need adjustment along the way.

Writers use all kinds of techniques to stimulate their thinking and to help them clarify relationships or comprehend the broader significance of a topic and arrive at a thesis statement. For more ideas on how to get started, see our handout on brainstorming .

How do I know if my thesis is strong?

If there’s time, run it by your instructor or make an appointment at the Writing Center to get some feedback. Even if you do not have time to get advice elsewhere, you can do some thesis evaluation of your own. When reviewing your first draft and its working thesis, ask yourself the following :

• Do I answer the question? Re-reading the question prompt after constructing a working thesis can help you fix an argument that misses the focus of the question. If the prompt isn’t phrased as a question, try to rephrase it. For example, “Discuss the effect of X on Y” can be rephrased as “What is the effect of X on Y?”
• Have I taken a position that others might challenge or oppose? If your thesis simply states facts that no one would, or even could, disagree with, it’s possible that you are simply providing a summary, rather than making an argument.
• Is my thesis statement specific enough? Thesis statements that are too vague often do not have a strong argument. If your thesis contains words like “good” or “successful,” see if you could be more specific: why is something “good”; what specifically makes something “successful”?
• Does my thesis pass the “So what?” test? If a reader’s first response is likely to  be “So what?” then you need to clarify, to forge a relationship, or to connect to a larger issue.
• Does my essay support my thesis specifically and without wandering? If your thesis and the body of your essay do not seem to go together, one of them has to change. It’s okay to change your working thesis to reflect things you have figured out in the course of writing your paper. Remember, always reassess and revise your writing as necessary.
• Does my thesis pass the “how and why?” test? If a reader’s first response is “how?” or “why?” your thesis may be too open-ended and lack guidance for the reader. See what you can add to give the reader a better take on your position right from the beginning.

Suppose you are taking a course on contemporary communication, and the instructor hands out the following essay assignment: “Discuss the impact of social media on public awareness.” Looking back at your notes, you might start with this working thesis:

Social media impacts public awareness in both positive and negative ways.

You can use the questions above to help you revise this general statement into a stronger thesis.

• Do I answer the question? You can analyze this if you rephrase “discuss the impact” as “what is the impact?” This way, you can see that you’ve answered the question only very generally with the vague “positive and negative ways.”
• Have I taken a position that others might challenge or oppose? Not likely. Only people who maintain that social media has a solely positive or solely negative impact could disagree.
• Is my thesis statement specific enough? No. What are the positive effects? What are the negative effects?
• Does my thesis pass the “how and why?” test? No. Why are they positive? How are they positive? What are their causes? Why are they negative? How are they negative? What are their causes?
• Does my thesis pass the “So what?” test? No. Why should anyone care about the positive and/or negative impact of social media?

After thinking about your answers to these questions, you decide to focus on the one impact you feel strongly about and have strong evidence for:

Because not every voice on social media is reliable, people have become much more critical consumers of information, and thus, more informed voters.

This version is a much stronger thesis! It answers the question, takes a specific position that others can challenge, and it gives a sense of why it matters.

Let’s try another. Suppose your literature professor hands out the following assignment in a class on the American novel: Write an analysis of some aspect of Mark Twain’s novel Huckleberry Finn. “This will be easy,” you think. “I loved Huckleberry Finn!” You grab a pad of paper and write:

Mark Twain’s Huckleberry Finn is a great American novel.

You begin to analyze your thesis:

• Do I answer the question? No. The prompt asks you to analyze some aspect of the novel. Your working thesis is a statement of general appreciation for the entire novel.

Think about aspects of the novel that are important to its structure or meaning—for example, the role of storytelling, the contrasting scenes between the shore and the river, or the relationships between adults and children. Now you write:

In Huckleberry Finn, Mark Twain develops a contrast between life on the river and life on the shore.

• Do I answer the question? Yes!
• Have I taken a position that others might challenge or oppose? Not really. This contrast is well-known and accepted.
• Is my thesis statement specific enough? It’s getting there–you have highlighted an important aspect of the novel for investigation. However, it’s still not clear what your analysis will reveal.
• Does my thesis pass the “how and why?” test? Not yet. Compare scenes from the book and see what you discover. Free write, make lists, jot down Huck’s actions and reactions and anything else that seems interesting.
• Does my thesis pass the “So what?” test? What’s the point of this contrast? What does it signify?”

After examining the evidence and considering your own insights, you write:

Through its contrasting river and shore scenes, Twain’s Huckleberry Finn suggests that to find the true expression of American democratic ideals, one must leave “civilized” society and go back to nature.

This final thesis statement presents an interpretation of a literary work based on an analysis of its content. Of course, for the essay itself to be successful, you must now present evidence from the novel that will convince the reader of your interpretation.

Works consulted

We consulted these works while writing this handout. This is not a comprehensive list of resources on the handout’s topic, and we encourage you to do your own research to find additional publications. Please do not use this list as a model for the format of your own reference list, as it may not match the citation style you are using. For guidance on formatting citations, please see the UNC Libraries citation tutorial . We revise these tips periodically and welcome feedback.

Anson, Chris M., and Robert A. Schwegler. 2010. The Longman Handbook for Writers and Readers , 6th ed. New York: Longman.

Lunsford, Andrea A. 2015. The St. Martin’s Handbook , 8th ed. Boston: Bedford/St Martin’s.

Ramage, John D., John C. Bean, and June Johnson. 2018. The Allyn & Bacon Guide to Writing , 8th ed. New York: Pearson.

Ruszkiewicz, John J., Christy Friend, Daniel Seward, and Maxine Hairston. 2010. The Scott, Foresman Handbook for Writers , 9th ed. Boston: Pearson Education.

You may reproduce it for non-commercial use if you use the entire handout and attribute the source: The Writing Center, University of North Carolina at Chapel Hill

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An Untapped Instrument in the Fight Against Poverty: The Impacts of Financial Literacy on Poverty Worldwide

• Original Research
• Open access
• Published: 07 August 2024

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• Ngoc Duc Lang 1 ,
• Ha Mai Tran 1 ,
• Giang Tra Nguyen 3 &
• Duc Hong Vo 1 , 2  

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The World Bank assessed that meeting the goal of eradicating extreme poverty by 2030 appears to be challenging (or even impossible) for the world. This observation requires an urgent need for policymakers to explore potent instruments to combat poverty globally. Numerous studies have examined various determinants of poverty. However, financial literacy—a relatively new concept—remains underexplored, especially on a global scale. As such, this study is conducted to assess whether financial literacy can reduce the likelihood of falling into poverty using a unique dataset of 113 countries. We find that financial literacy has a significant and negative association with the likelihood of falling into poverty. Beyond association, the causal analysis shows that financial literacy exerts a negative effect on poverty. Our findings remain largely unchanged across different sub-samples based on socio-demographic factors, regions and country income levels, and robustness analyses.

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1 Introduction

In the vast landscape of societal challenges, few issues resonate as profoundly as poverty. Its far-reaching implications permeate every facet of human life, from education attainment and health outcomes to economic development, political stability, and social mobility. According to the World Bank, around 9.2 per cent of the global population lived in extreme poverty in 2020, defined as living on less than $1.90 per day. The COVID-19 pandemic has further exacerbated poverty rates, with an estimated 120 million and 150 million people pushed into extreme poverty in 2020 and 2021, respectively (World Bank, 2020a ). Knowing that the $1.90 per day international poverty line may be too low to determine people experiencing poverty in middle-income countries, the World Bank adjusted this line to $3.20 and $5.50 for lower-middle-income and upper-middle-income countries. Based on these poverty lines, nearly one-fourth of the global population lives below the $3.20 threshold, while over 40% of the world’s population, nearly 3.3 billion individuals, live below the $5.50 benchmark (World Bank, 2020b ). The World Bank even stated that achieving the goal of eradicating extreme poverty by 2030 seems hard to meet (Reuters, 2022 ). These facts show that poverty is still a considerable challenge in the world.

The topic of poverty, with its inherent challenges and potential for positive impact, beckons researchers to engage in a meaningful exploration that transcends disciplines. Research on this topic is intellectually stimulating and carries profound implications for policymaking, social programs, and the well-being of millions worldwide. By shedding light on the nuances of poverty, researchers have the power to inform transformative interventions, challenge systemic inequalities, and pave the way for a more inclusive and equitable future. Inspired by this, our research aims to explore novel and potent instruments for eliminating poverty on a global scale.

The current literature has documented a wide range of factors associated with poverty reduction, including schooling (Hofmarcher, 2021 ; Zhang, 2014 ), employment and nonfarm employment (Lanjouw, 1999 ; Page & Shimeles, 2015 ; Thompson & Dahling, 2019 ), microfinance and financial inclusion (Koomson et al., 2020a ; Li, 2018 ; Polloni-Silva et al., 2021 ), women empowerment (Tang, 2022 ), energy and renewable energy accessibility (Taghizadeh et al., 2023 ; Zhao et al., 2022 ), infrastructure development (Timilsina et al., 2020 ), health status and healthcare availability (Krishna, 2007 ; Silverman et al., 2016 ; Zhou et al., 2020 ), and others.

In recent years, there is a growing literature on the impact of financial literacy on poverty alleviation. Using the China Household Finance Survey (CHFS) from 2015 to 2017, Xu et al. ( 2023 ) show that financial literacy can effectively and efficiently reduce poverty among rural households in the short and long term. Similarly, financial literacy is also found to have positive impacts on poverty alleviation in Chinese households (Wang et al., 2022 ). Jappelli et al. ( 2014 ) even recognize financial literacy as essential to eradicating poverty. Besides poverty, some studies also provide evidence of the positive effects of financial literacy on income and wealth accumulation, which are closely related to poverty. Adopting a new instrument variable method, Van Rooij et al. ( 2012 ) confirm the positive effect of financial literacy on household wealth in the Netherlands. Sekita et al. ( 2022 ) also find the same result in Japan. Meanwhile, financial illiteracy is a crucial predictor of wealth inequality (Jappelli & Padula, 2013 ; Lusardi et al., 2017 ). In addition, Disney and Gathergood ( 2011 ) indicate that financially literate people have higher household income levels. These studies provide many meaningful insights into poverty reduction and the income and wealth of individuals and households. Unfortunately, the current literature only focuses on a single country, such as China, the Netherlands, and Japan.

Our study contributes to the current literature as follows. First, we are the first to explore whether financial literacy reduces the likelihood of individuals falling into poverty on a global scale. Our analyses confirm that financial literacy significantly and negatively affects poverty worldwide. Second, this is also the first attempt to provide thorough analyses of the relationship between financial literacy and poverty across different socio-demographic groups, regions, and country income levels. The results show that the negative association between financial literacy and poverty remains largely unchanged across different socio-demographic groups, regions, and country income levels, implying that our results can be applicable in various contexts. Last, various robustness checks are conducted to ensure that the impacts of financial literacy are not deviated by reverse causality, omitted variable bias and variation between countries. The coefficients of financial literacy on poverty are still significant and negative across robustness tests, including (i) probit models with Gaussian copula terms (addressing endogeneity concerns), (ii) multilevel probit models (considering variations across countries), and (iii) Rubin’s ( 1974 ) causal model (addressing omitted variable concerns).

Following this introduction, the remainder of this paper can be summarized as follows. Section  2 provides a detailed review of financial literacy and poverty studies. In Sect.  3 , we describe the measures of poverty and the econometric strategy employed in this paper. Section  4 presents the empirical results, while Sect.  5 thoroughly discusses these results. Finally, we conclude and provide policy implications derived from our findings in Sect.  6 .

2 Literature Review

We classify the literature under review into three strands of financial literacy and poverty studies. The first strand deals with the determinants of poverty at the macro level. The second strand is the determinants of poverty at the individual level. The third strand includes findings regarding the impacts of financial literacy.

2.1 Macro-Level Determinants of Poverty

First, the existing literature has documented various country-level factors influencing poverty, including economic growth (Adams, 2004 ; Klasen, 2008 ); trade openness and liberalization (Bhagwati & Srinivasan, 2002 ; Harrison et al., 2003 ; Hertel & Reimer, 2005 ); financial development (Bolarinwa et al., 2021 ; Jeanneney & Kpodar, 2011 ; Perez-Moreno, 2011 ), foreign direct investment (Gohou & Soumaré, 2012 ) the informationization level (James, 2006 ; Mora-Rivera & García-Mora, 2021 ), institutional factors such as political stability, and corruption (Han et al., 2022 ; Tebaldi & Mohan, 2010 ).

2.2 Individual-Level Determinants of Poverty

Regarding the second strand, there is a rich literature on individual-level factors that influence the likelihood of falling into poverty. Using a vast database of 32 European countries, Hofmarcher ( 2021 ) points out substantially and significantly mitigating the effects of education on poverty. Similarly, studies by Zhang ( 2014 ), Ladd ( 2012 ) and Zhang and Zhao ( 2006 ) also confirm that education is positively associated with poverty reduction. The literature also emphasizes the gendered dimensions of poverty that female and female-head households are often at higher risk of falling into and staying in poverty than males (Lewin & Stier, 2018 ; Millar & Glendinning, 1989 ). This phenomenon was noted as the “feminization of poverty”—the growing trend wherein individuals experiencing poverty are predominantly women—by Pearce ( 1990 ). Along with gender, marital status, and the number of children at home can exert significant effects on poverty. Unmarried people are found to be poorer than legally married ones in Mexico (Ortega-Díaz, 2020 ), but a reversed trend is observed in Nigeria (Anyanwu, 2014 ). Herbst-Debby et al. ( 2021 ) show that divorce heightens the likelihood of poverty for women and diminishes this likelihood for men. Nevertheless, for both genders, the combination of divorce and more children at home amplifies the risk of poverty. In contrast, divorce or separation is negatively correlated with the probability of falling into poverty in the study by Anyanwu ( 2014 ). Additionally, the study by Anyanwu ( 2014 ) points out that household size is an important factor influencing poverty. Besides, old age has also been found to be correlated with poverty in many countries (Kwan & Walsh, 2018 ; Lloyd-Sherlock, 2000 ). Lastly, employment and nonfarm employment are effective and efficient in helping people escape from poverty, especially in African countries (Lanjouw, 1999 ; Page & Shimeles, 2015 ; Thompson & Dahling, 2019 ).

2.3 The Impacts of Financial Literacy

Besides, there is a rapidly expanding body of research examining the effects of financial literacy on various aspects of individuals, households, and society. These impacts can be categorized into two main groups: (i) impacts on behaviours and (ii) impacts on financial capacity.

The literature analyzing the impacts of financial literacy on behaviours is elaborated first. Utilizing data from 143 countries worldwide in 2014, Grohmann et al. ( 2018 ) confirm the important role of financial literacy in improving financial inclusion under “all” circumstances. Specifically, financial literacy boosts bank account ownership, savings at a formal financial institution, debit card ownership, and usage among populations in countries with both high and low levels of financial depth. Similarly, studies by Cole et al. ( 2011 ) and Hogarth et al. ( 2005 ) also point out the negative correlation between financial literacy and the number of unbanked adults and inactive account holders. However, Cole and Shastry ( 2009 ) note an exception in the United States, where financial market participation is not influenced by state-mandated financial literacy education. Besides, Cohen and Nelson ( 2011 ) document the positive effects of financial literacy on people's awareness of available financial services and the ability to choose suitable financial services. Additionally, the higher rate of stock participation can be attributed to financial literacy, as it encourages the use of financial instruments such as insurance and credit to protect individuals from unexpected incidents and change household risk attitudes (Urrea & Maldonado, 2011 ; Koomson et al., 2020b ). The positive effects of financial literacy on stock market participation are also confirmed in other studies, such as Almenberg and Dreber ( 2015 ), Van Rooij et al. ( 2011 ) and Christelis et al. ( 2010 ). The causal effects of economic education on stock market participation are even established by Christiansen et al. ( 2008 ). In terms of formal financial inclusion, financial literacy, on the one hand, helps those in need recognize the credit demand and their demand-based credit constraints (Lusardi & Tufano, 2015 ; Sol Murta & Miguel Gama, 2022 ; Stango & Zinman, 2009 ). On the other hand, financial literacy improves their understanding of policies and lending information (Bilal et al., 2021 ). Borrowers have a higher propensity to lend from formal financial institutions instead of from casual relationships such as family and friends or loans from informal lenders (Xu et al., 2020 ). This finding is noted as “increasing household credit access by breaking down the information barrier” by Wang et al. ( 2022 ). These favourable outcomes contribute significantly to the broader positive impact of financial literacy—promoting entrepreneurial behaviours (Ćumurović & Hyll, 2019 ). By addressing household demand for credit and removing credit constraints, financial literacy directly mitigates primary constraints on residents’ entrepreneurial activities (Karaivanov, 2012 ; Weng et al., 2022 ). Similarly, the higher propensity to buy insurance and credit for risk protection, along with better investment opportunities, can also boost households’ willingness to start a business (Bilal et al., 2021 ; Cude et al., 2020 ).

Financial literacy plays a pivotal role in equipping individuals with the essential skills and qualities necessary for undertaking entrepreneurial activities (Oggero et al., 2020 ), including better allocation decisions to different types of assets and better entrepreneurial choices. Additionally, Lusardi and Mitchell ( 2011a . 2011b ) and Bucher-Koenen and Lusardi ( 2011 ) successfully prove the higher propensity to plan for retirement in financially literate individuals. At the same time, Niu et al. ( 2020 ) also discover the ability to build a comprehensive, long-term financial plan for people in this group. Despite the robust impacts of financial literacy on bank accounts and debit card usage, financial literacy’s impacts on savings and wealth accumulation vary in different studies. Karlan et al. ( 2014 ) assert no correlation between higher usages of savings products resulting from higher financial literacy and the increase in users’ net savings (due to the possibility of crowd-out and crowd-in) and/or the improvement in their overall wealth (due to the probability of trade-off between money for savings and money for other activities like borrowing, investment, health, and consumptions). This finding aligns with those reported in the study conducted by Dupas et al. ( 2018 ), which utilizes data from Chile, Malawi, and Uganda. Conversely, Banerjee ( 1992 ) and Hastings et al. ( 2013 ) still find a high correlation between financial illiteracy and low savings.

Besides behaviours, financial literacy also can influence individuals' financial statuses. First, financial literacy significantly contributes to a better financial decision-making process (Evans & Jovanovic, 1989 ; Santos et al., 2022 ). Specifically, a higher level of financial literacy empowers individuals to effectively utilize financial instruments by enabling them to evaluate the value of financial products and make well-informed decisions, such as those related to reverse mortgages (Davidoff et al., 2017 ; Duca & Kumar, 2014 ) and investments (Bucher-Koenen & Ziegelmeyer, 2014 ; Guiso & Viviano, 2015 ; Klapper et al., 2013 ). Moreover, research in Germany (Bucher-Koenen & Lusardi, 2011 ), the Netherlands (Van Rooij et al., 2011 ) and Russia (Klapper & Panos, 2011 ) show that individuals with basic financial understandings are more excel in planning and saving for retirement. Second, for debt management, Lusardi and Tufano ( 2015 ) and Stango and Zinman ( 2009 ) discover a strong relationship between debt literacy and debt load. Debt-illiterate borrowers usually struggle with transacting in high-cost ways (paying fees and borrowing at high interest rates) and end up borrowing more but saving less (Galariotis & Monne, 2023 ). Meanwhile, adults with higher debt literacy are less likely to be over-indebted (Gathergood, 2012 ) and to fall into the trap of fictitious billing and loan guarantee fraud (Kadoya et al., 2021 ). A possible explanation can be that financial literacy practices caution, decreased comfort with debt, and sensitivity to the framing of people (Lusardi & Messy, 2023 ). Financial knowledge can also facilitate the alignment of liabilities with debt obligations, a critical aspect of prudent mortgage management (Thorp et al., 2023 ).

2.4 Financial Literacy and Poverty

Because our research focuses on poverty, the impacts of financial literacy on poverty are separately presented in this subsection. Studies in rural Chinese areas (Wang et al., 2022 ; Xu et al., 2023 ) show that financial literacy alleviates the poverty probability of households in both short and long term. Besides poverty, researchers also point out the positive impacts of financial literacy on poverty-related factors such as wealth and income. Research on the impacts of financial literacy on wealth accumulation in Chile (Behrman et al., 2012 ), The Netherlands (Van Rooij et al., 2012 ) and Japan (Sekita et al., 2022 ) all support a consistent result: financial literacy significantly and positively contributes to the wealth accumulation. Conversely, financial illiteracy is positively correlated with wealth disparity (Jappelli & Padula, 2013 ; Lusardi et al., 2017 ) and negatively correlated with income (Disney & Gathergood, 2011 , 2013 ; Gathergood, 2012 ).

In general, Jappelli et al. ( 2014 ) indicate financial literacy as a driving force in tackling impoverishment worldwide. However, as shown above, there are only two studies in a single country (Xu et al., 2023 ; and Wang et al., 2022 ) directly investigating the impact of financial literacy on poverty. The limited poverty literature can impede global progress in sustainable poverty reduction. As such, there is a growing need for research on the impacts of financial literacy on poverty in various countries and worldwide. This observation warrants our study to be conducted.

The current literature shows a variation in the definition of financial literacy. While it can be broadly defined as financial capability encompassing knowledge, behaviour, and self-efficacy (Xiao et al., 2022 ), it can also be narrowly defined as basic financial knowledge for decision-making (Lusardi & Mitchell, 2014 ). In this study, we utilise the narrow definition of financial literacy, capturing four fundamental concepts, including risk diversification, inflation, basic numeracy, and compound interest.

3 A Theoretical Framework and Hypothesis Development

The relationship between financial literacy and poverty reduction can be elucidated through the human capital theory. We establish the theoretical framework for this study in two steps. First, we review the human capital theory and specify its relevance to financial literacy and poverty reduction. Second, we build on existing literature to theorize the relationship between financial literacy and poverty reduction.

3.1 The Overview of Human Capital Theory

The concept of human capital can be dated back to Smith ( 1776 ) in the work of Adam Smith, while the first formal use in research using the term human capital belongs to Irving Fisher ( 1897 ), and then the theory was popularized by the work of Mincer ( 1958 ), Schultz ( 1961 ) and Becker ( 1962 , 1964 ). The theory posits that economic outputs can be improved by bettering people's inputs, such as education and health (Baldacci et al., 2008 ), and treating these inputs as a form of capital. As such, similar to physical or financial capital, they can be invested. Hence, enhancing financial literacy can positively affect poverty alleviation, which is an economic outcome.

3.2 Financial Literacy, Financial Behaviour, and Poverty

Several studies highlight that for the poor, financial behaviour is more crucial than financial knowledge in improving financial well-being (Xiao & Porto, 2022 ) and, consequently, in reducing poverty. In other words, having knowledge without taking action appears insufficient to decrease the likelihood of falling into poverty. Nonetheless, this does not mean that financial knowledge plays no role in reducing poverty. Indeed, lacking basic financial knowledge can hinder people from adopting healthy financial behaviours such as formal borrowing with better terms, mortgage refinancing (Bialowolski et al., 2022 ), person-to-person (P2P) borrowing (Han et al., 2019 ), avoiding risky credit behaviour (Xiao et al., 2014 ) and financial asset holding (Zhu & Xiao, 2022 ). Grohmann et al. ( 2018 ) highlight the essential role of financial literacy in improving financial inclusion across all circumstances. It boosts bank account ownership and formal savings in both high- and low-financial depth countries.

As such, financial knowledge serves as a critical foundation for financial behaviours, considerably enhancing financial well-being (Xiao & Porto, 2022 ) and financial resilience (Klapper & Lusardi, 2020 ), thereby reducing the probability of falling into poverty. Additionally, by being equipped with financial literacy, people are more motivated and confident in dealing with financial matters; this can be deemed as an effect of self-efficacy—a “hidden” form of human capital (Roy et al., 2018 ). This form of capital implies that people are prone to engage in activities commensurate with the level of proficiency they perceive themselves to possess. Hence, financial literacy catalyzes changing financial behaviour, thereby alleviating poverty. Building on the theoretical model and the discussion of financial literacy in the literature review section, three main hypotheses are proposed:

Financial literacy is negatively associated with the probability of falling into poverty.

Financial literacy is positively associated with desirable financial behaviours, such as bank account ownership ( H 2a ) and formal savings ( H 2b ). In turn, these desirable financial behaviours are negatively associated with the probability of falling into poverty.

4 Data and Methodology

Data used in the empirical analysis in this paper are collected by merging information from three datasets: (i) the S&P Global FinLit Survey 2014, Footnote 1 (ii) the Global Findex 2014 Footnote 2 and (iii) the Gallup World Poll (GWP) 2014 Footnote 3 to form a unique dataset of 150,000 adults across 142 countries. Because these three datasets were conducted jointly by Gallup, Inc., and the World Bank in 2014, they share the same sampling method and respondents. Researchers can easily merge these three datasets since each respondent has a unique identifier. With this rich dataset covering 142 countries in 2014, we can thoroughly examine the relationship between financial literacy and poverty reduction. Details of each dataset are discussed below.

Our empirical analysis centres on the S&P Global FinLit Survey, the most comprehensive global-scale survey on financial literacy (GFLEC, 2023 ). Notably, the S&P Global FinLit Survey was built on the collaboration among Gallup, Inc., the World Bank, and other stakeholders in 2014, leading to a shared sample and sampling method with the Gallup World Poll (GWP). With a universal approach, the S&P Global FinLit Survey measures the understanding of four fundamental financial concepts: (1) risk diversification, (2) inflation, (3) basic numeracy, and (4) interest compounding. Details of financial literacy questions are provided in Table  18 in the Appendix. These concepts closely relate to daily financial decision-making. Particularly, the knowledge of risk diversification is the understanding of reducing risk without sacrificing expected returns in business and investment (Reinholtz et al., 2021 ). Inflation knowledge alerts people of purchasing power fluctuation over time and encourages strategic decisions to cope with its menace. Basic numeracy is essential in financial market activities, particularly in calculating interest to prevent over-indebtedness (Lusardi & Tufano, 2015 ), mortgage delinquency, and default (Gerardi et al., 2013 ). Additionally, proficiency in interest compounding enables individuals to anticipate interest payments and make informed choices for the most beneficial financial products. In addition, we obtain the data on bank account ownership and formal savings from the Global Findex 2014 dataset, which shares the same respondents with the S&P Global FinLit.

Because the data on the socio-demographic characteristics of respondents are limited in the S&P Global FinLit Survey 2014, the GWP is utilized. The GWP is an annual statistical collection of nationally representative on a global scale regarding important issues worldwide (Gallup, 2016 ). From the GWP, we collect information on gender, age, education level, marital status, employment status, urbanicity, and household size. These variables collectively form the baseline model in all our regression analyses and become significantly important for investigating the heterogeneous impacts of financial literacy on the likelihood of falling into poverty across different subsamples regarding demographic and socioeconomic factors. With data from the S&P Global FinLit Survey and the GWP, we can ensure the unbiasedness and reliability of our results for several reasons. Firstly, the Kish grid method is employed to select interviewees randomly and directly interact with these interviewees through face-to-face interviews or 80% telephone coverage (Gallup, 2016 ). Additionally, as they pose uniform questions at the individual level worldwide and employ a robust translation and sampling scheme (Gallup, 2016 ), they mitigate our concern about potential minor errors, as seen in other global surveys.

During the data cleansing process, observations with missing values of used variables are eliminated. Additionally, all respondents are non-poor in some countries, such as Norway. This means that these countries would predict non-poor perfectly and would automatically be removed by the probit model. Therefore, we eliminate these countries from the sample to avoid potential bias. Ultimately, 115,336 observations from 113 countries remain for analysis, accounting for about 77% of the initial sample. The full list of 113 countries is provided in Table  17 in the Appendix. The summary statistics are presented in Table  1 .

4.2 Methodology

We construct the financial literacy score by aggregating correct answers from five financial concept questions (Table  18 ) in the S&P Global FinLit Survey. For each correct answer, respondents score one point, resulting in an aggregate score ranging from 0 to 5.

Next, we categorize respondents into poor and non-poor based on international poverty lines. The procedure to derive this variable is as follows. First, we divide each respondent’s annual income in local currency by the purchasing power parity (PPP) conversion factor (local currency per US$) in 2017, as determined by the World Bank, to estimate the annual income in 2017 US$ PPP. Then, we assign the value 1 to \(Poverty_{i}\) if the estimated annual income (2017 US$ PPP) is below the international poverty lines U$ 2.15 (for those in low-income countries), U$ 3.65 (for those in lower–upper-income countries) and U$ 6.85 (for those in upper-middle- and high-income countries) and 0 otherwise. Please refer to Jolliffe and Prdyz ( 2016 ) and Jolliffe et al. ( 2022 ) for rationales behind these international poverty lines.

Because the dependent variable, \(Poverty_{i}\) is binary, we utilize a probit regression. The estimation model is specified as follows:

where \(i\) represents the respondent. \(Poverty_{i}\) is a dummy variable which equals 1 if the respondent is classified as poor, 0 if otherwise. \(Finlit_{i}\) denotes the financial literacy score of the respondent. For each correct answer to the five financial concept questions in the S&P Global FinLit Survey, respondents score one point. The aggregate score ranges from 0 to 5. \(X_{i}\) is the matrix of control variables. Following Xu et al. ( 2023 ), we employ gender, age, urban residence, household size, educational attainment, marital status, and employment status as individual-level control variables. \(Y_{j}\) is the matrix of country dummies. Finally, \(e_{j}\) is the error term of the model.

The paper now proceeds to report and discuss the findings. First, the empirical results regarding the association of financial literacy with the probability of populations across 113 countries falling into poverty are reported. This is followed by a heterogeneity analysis, an analysis of financial literacy components, and a mediation analysis.

5.1 Main Results

The estimated coefficients of financial literacy are shown in Table  2 . Columns 1 and 2 show the empirical results from probit models. Socio-demographic factors (i.e., age, education, employment status, and others) are incorporated as control variables in all models. Furthermore, the country where respondents live can affect economic opportunities, access to education, and the availability of financial resources, which consequently affect poverty. Hence, country dummies are added to control variations across countries.

Column 1 shows that financial literacy negatively affects the probability of falling into poverty. The slope coefficient of financial literacy is statistically significant at the 1 per cent level. Holding other things constant, a unit increase in the financial literacy index corresponds to a 6.2% decrease in the probability of falling into poverty. This coefficient even increases from 6.2 to 7.5% after controlling variations across countries (Column 2). Overall, the results indicate that financial literacy is negatively associated with the probability of falling into poverty, supporting Hypothesis 1.

5.2 Heterogeneity Analysis

Using probit models with Gaussian copula, we then analyze the heterogeneous association of financial literacy with the likelihood of being poor across sub-samples divided based on socio-demographic factors, regions and country income levels. The Shapiro–Wilk tests conducted in all models reject the null hypothesis of normality of financial literacy (the endogenous variable), suggesting that Gaussian copula estimations are appropriate (Park & Gupta, 2012 ). The results for demographic and socioeconomic groups are shown in Tables 3 and 4 , respectively. Next, the results for different regions and income groups are provided in Tables 5 and 6 , respectively.

As shown in Table  3 , financial literacy significantly and negatively affects poverty across different demographic groups. Specifically, financial literacy exerts a larger association with poverty among female, old and married populations than the opposite (male, young and unmarried). To start, we compared the association of financial literacy with the chances of escaping from poverty by gender of respondents. Results show that a financially literate woman can decrease the likelihood of falling into poverty by 17%, compared with the poverty reduction of 13.2% by a man having financial knowledge (Columns 1 and 2). A similar pattern is also observed in a 2014 World Bank report on traditional literacy terms, which found that each additional year of schooling boosts women’s earnings by an average of 11.7% versus 9.6% for men (Montenegro & Patrinos, 2014 ). Regarding age, financial literacy has a greater association with poverty reduction among old people (aged 60 and over) than young ones. Ceteris paribus, a unit increase in financial literacy can lead to a 14.2% decrease in the likelihood of falling into poverty for older people and a 13.8% decrease for younger ones. The association of an individual's financial understanding with the risk of falling into poverty, categorized by marital status, are presented in columns 5 and 6 of Table  3 . The results show that financially literate married individuals have a 17.7% lower likelihood of falling into poverty, which is 5.5% higher compared to unmarried individuals.

Regarding socioeconomic groups, the results are reported in Table  4 concerning urban residence in Columns 1 and 2, employment status in Columns 3 and 4, and education attainment in Columns 5–7. Results show that the association of financial literacy with poverty are more pronounced among residents with low socioeconomic status (rural, unemployed, and low-education-level residents). Specifically, financial literacy exerts a larger association with poverty reduction among rural residents than urban ones. A financially literate person living in rural areas can decrease the likelihood of falling into poverty by 15.4%, compared to a decrease of 11.4% for those living in urban areas. Similarly, a one-unit increase in financial literacy is associated with a poverty reduction of 16.8% among employed individuals, while it just fell by 14% among those unemployed (Columns 3 and 4). Next, we examine in more detail how financial knowledge differentially affects poverty alleviation among individuals who have completed tertiary education or higher, those who completed secondary education and those who completed primary education or lower. Financial literacy has a smaller association with the chances of escape from poverty among people with a bachelor’s degree. Specifically, an increase in financial literacy corresponds to a decrease in the likelihood of falling into poverty by 18.8% for individuals who completed primary education (Column 7) and by 8% for those who completed secondary education (Column 6). These coefficients are statistically significant at 1% level. Meanwhile, the effect decreases to 6.8% for those with a bachelor’s degree. The coefficient of financial literacy even turns out to be insignificant for those with a bachelor’s degree, implying that financial literacy may have no effect in this group (Column 5).

Several studies indicate variations in financial knowledge and financial behaviours across countries with different cultures (Biolowalski et al., 2023 ) and developmental stages (Xiao & Biolowalski, 2023 ). Biolowalski et al. ( 2023 ) find that individualism, long-term orientation, and indulgence are positively correlated with financial capability (which includes financial knowledge and behaviour), whereas uncertainty avoidance exhibits a negative correlation. Interestingly, Xiao and Biolowalski ( 2023 ) show that financial capability exhibits a stronger correlation with human development in highly developed countries, implying that promoting financial capability is more cost-effective and beneficial in these countries. Therefore, we conduct further analysis to examine the heterogeneity in the relationship between financial literacy and poverty across regions and country income levels . Regarding regions, as shown in Table  5 , the coefficients of financial literacy are negative and statistically significant across East Asia and Pacific, Europe and Central Asia, Latin America and the Caribbean, North America, and Sub-Saharan Africa (Table  5 ). However, in South Asia and the Middle East & North Africa, although the coefficients remain negative, they are not statistically significant. Regarding country income levels, financial literacy has the largest association with poverty in low-income countries and the smallest association with poverty in high-income countries (Table  6 ). Holding other things constant, a unit increase in the financial literacy index can lead to a 32.5% (9.3%) decrease in the likelihood of falling into poverty in low-income (high-income) countries. The coefficients of financial literacy are statistically significant across all country income levels. These results suggest that while financial knowledge may be more beneficial to high-income countries in terms of human development—a broad measure encompassing education, health, and income (Xiao & Biolowalski, 2023 ), it is more advantageous for low-income countries in reducing poverty, which is a narrower measure capturing income levels and basic needs.

5.3 Robustness Check

This sub-section presents results from the robustness tests to assess whether the effects of financial literacy on the probability of falling into poverty are causal. First, to address potential endogeneity issues that can mislead financial literacy’s actual impacts on poverty, we follow Shin et al. ( 2022 ) to employ probit models with the Gaussian copula term. Specifically, the Gaussian copula term of financial literacy is \(Copula term_{Financial Literacy} = \emptyset^{ - 1} \left( {H_{Financial Literacy} } \right)\) , where \(\emptyset^{ - 1}\) is the inverse of the cumulative normal distribution and \(H_{Financial Literacy}\) is the empirical distribution functions of financial literacy score. Eckert and Hohberger ( 2023 ) provide instructions on how to build the Gaussian copula term using Stata software. The Gaussian copula term can control the correlation between financial literacy and error terms. The results are reported in Columns 3 and 4 of Table  2 . The Shapiro–Wilk test result indicates that financial literacy is non-normally distributed, confirming the appropriateness of Gaussian copula estimations (Park & Gupta, 2012 ). The alleviating effects of financial literacy on poverty remain consistent when Gaussian copula terms are included in models (Columns 3 and 4). After controlling for endogeneity concerns, the effect size of financial literacy even increases to 13.7% (Column 4). The Gaussian copula term is moderately statistically significant in Column 3 and turns out to be statistically insignificant in Column 4, where country dummies are added. These results indicate that endogeneity issues are not severe in probit models with country-fixed effects. Generally, these results suggest that financial literacy exerts alleviating effects on the probability of populations across more than 100 countries falling into poverty.

Second, in order to test whether the relationship between financial literacy and the probability of falling into poverty is affected by omitted variable bias, we employ a novel approach, namely, Rubin’s ( 1974 ) causal model. This model allows researchers to conduct a robustness of inference to replacement (RIR) analysis and the impact threshold of a confounding variable (ITCV) analysis (Frank, 2000 ; Frank et al., 2013 ; Xu et al., 2019 ). The RIR analysis quantifies how many observed cases need to be replaced with the opposite cases to invalidate the causal inference. The ITCV analysis indicates how correlated an omitted variable would have to be with the independent and dependent variables for the statistical inference to change. Indeed, the RIR analysis is a part of the ITCV analysis family (Frank, 2000 ). Xu et al. ( 2019 ) suggest that for a nonlinear model, the ITCV analysis should not be used because it is correlation-based and thus applies only to linear cases. Instead, the per cent bias to invalidate the inference (i.e., RIR) should be applied in this case (see also Busenbark et al., 2022 for further guidance on deciding whether to use ITCV or RIR); since our model is non-linear, we conduct the RIR analysis, using the konfound command (Xu et al., 2019 ) in Stata with the nonlinear option specified.

The results are presented in Table  7 . In Column 1, it is shown that up to 85.89% of observations in our sample would need replacement to invalidate the effects of financial literacy on poverty. This corresponds to 99,062 out of 115,336 observations, as indicated in Column 2. In other words, to invalidate the inference, 85.89% (99,062) of the cases would have to be replaced with cases with an effect of 0. We thus conclude that omitted variable bias is not a major concern in our analysis.

Similar patterns are also observed in sub-samples (Tables 8 , 9 and 10 ). For demographic groups, from 75 to 84% of the cases would have to be replaced with cases for which there is an effect of 0 to invalidate the causal inference (Table  8 ). This implies that omitted variable bias is highly unlikely to affect the impacts of financial literacy on poverty in demographic groups. Table 9 also indicates that omitted variable bias is not severe among socioeconomic groups. However, for the group with tertiary or higher education, only 8.33% of the cases needed to be replaced with counterfactual cases to invalidate the impact of financial literacy on poverty. For regions, results from Table  10 indicate that the estimated effect of financial literacy on poverty is vulnerable to omitted variable bias in North America because only 1.87% of cases need to be replaced to invalidate the inference. In contrast, the effect of financial literacy is robust in other regions. Additionally, as shown in Table  11 , the effect of financial literacy on poverty is also robust across different income levels.

Third, in line with Chaudhry and Shafiullah ( 2021 ), we also employ OLS and Lewbel’s ( 2012 ) instrumental variable approach to examine whether our results change under different estimation models. Unlike the traditional instrumental variable approach, which necessitates external instrumental variables for endogenous variables in the model, Lewbel’s ( 2012 ) instrumental variable approach self-generates internal variables from the heteroscedasticity of the model. This approach has been widely employed in the literature as a robustness check when traditional instruments are used or when external instruments are lacking (Churchill & Smyth, 2017 ; Wang & Cheng, 2022 ). Prior research suggests that the instrumental variable (IV) estimates obtained by this method are nearly identical to those obtained by using conventional validated IVs (Umberger et al., 2015 ). The Lewbel's ( 2012 ) approach is briefly outlined as below:

where \(Y_{1}\) stands for the dependent variable. \(Y_{2}\) refers to the endogenous variable. \(U\) denotes the unobserved characteristics that can affect both \(Y_{1}\) and \(Y_{2}\) . \(V_{1}\) and \(V_{2}\) are idiosyncratic errors. Lewbel ( 2012 ) posits that there exists a vector \(Z\) of observed exogenous variables meeting the conditions that \(E\left( {X\varepsilon_{1} } \right) = 0\) , \(E\left( {X\varepsilon_{2} } \right) = 0\) , \(Cov = \left( {Z, \varepsilon_{1} \varepsilon_{2} } \right)\) , with some degree of heteroskedasticity in \(\varepsilon_{j}\) . The vector Z may be a subset of X or equivalent to X. Under these conditions, \(\left[ {Z - E\left( Z \right)} \right]\varepsilon_{2}\) can serve as a vector of valid instruments satisfying the standard rank condition. We regress financial literacy on \(\tilde{\user2{X}}\) and then obtain the residuals \(\widehat{{\varepsilon_{2} }}\) , which are consistent estimates of the reduced form error \(\varepsilon_{2}\) . The estimated residuals are then used to create \(\left[ {Z - E\left( Z \right)} \right]\widehat{{\varepsilon_{2} }}\) as self-generated internal instruments for estimation.

The results are presented in Columns 1 and 2 of Table  15 . The Breusch–Pagan test rejects the null hypothesis of homoscedasticity, indicating that Lewbel’s ( 2012 ) approach is appropriate in this case. The coefficients of financial literacy are still statistically significant and negative. This implies that financial literacy exerts causal impacts on the likelihood of falling into poverty worldwide.

Finally, as our respondents are nested in countries, those from the same country may share some common characteristics that potentially affect their financial literacy and the likelihood of falling into poverty. If this holds true, the estimated effects of financial literacy on poverty can be biased and invalid. Multilevel modelling is often adopted to deal with such hierarchical data. As our dependent variable is a dummy variable, which equals 1 if the respondent is poor and 0 if otherwise, multilevel probit modelling with individuals at level 1 and countries at level 2 will be employed. In addition, because there is no obvious evidence that the effect sizes of financial literacy vary across countries, random intercept multilevel probit modelling is utilized. The estimation is specified below.

where \(i\) and \(j\) represent the respondent and country, respectively. \(Poverty_{ij}\) is a dummy variable which equals 1 if the respondent is classified as poor, 0 if otherwise. \(Finlit_{ij}\) is the financial literacy score of the respondent. \(X_{ij}\) is the matrix of individual-level control variables. \(Y_{j}\) is the matrix of country-level control variables. Data on country-level control variables, including GDP per capita, the proportion of private credit to GDP, trade openness, foreign direct investment, internet users (% of the population), mobile cellular subscriptions (% of the population), rule of law index, political stability index, and control of corruption index, are collected from World Development Indicators (WDI). Finally, \(u_{ij}\) and \(e_{j}\) are level 1 (individual) and 2 (country) error terms.

The results are reported in Table  16 . It can be observed that financial literacy has a statistically significant and negative effect on the likelihood of falling into poverty (Column 1). As shown in Columns 2–10, the coefficients of financial literacy remain statistically significant and negative when country-level variables are added to the model in Column 1. This implies that our results are robust to variations across countries.

5.4 Financial Literacy Components

In this sub-section, we examine each financial literacy component, including (i) risk diversification, (ii) inflation, (iii) numeracy (capacity to do simple calculations regarding interest rates) and (iv) compound interest. As shown in Table  12 , all four components are significantly and negatively associated with the probability of falling into poverty. The rationales behind these results are as follows. First, numeracy is essential for everyone in managing everyday finance decisions, such as budgeting, comparing prices, and understanding bills. Second, understanding how interest accumulates can help individuals avoid predatory lending and seek more favourable credit terms, reducing the likelihood of falling into debt traps. Third, understanding how inflation erodes purchasing power may encourage seeking out interest-bearing accounts and other savings mechanisms that keep pace with inflation. This knowledge helps individuals protect their financial resources from losing value over time, resulting in a decrease in the probability of falling into poverty. Finally, knowledge of risk diversification can help individuals diversify assets and investments, reducing vulnerability to financial shocks and building resilience against unexpected events.

However, there are differences in their magnitudes. Specifically, compound interest, numeracy, and inflation have the first, second, and third largest associations with poverty. In contrast, the coefficient of risk diversification is the smallest. This suggests that knowledge of compound interest, numeracy, and inflation is more essential for people than knowledge of risk diversification. On the one hand, as discussed above, compound interest, numeracy, and inflation are fundamental concepts that directly help in making daily financial decisions, avoiding predatory lending and obtaining better interest term loans (Bialowolski et al., 2022 ), all of which are significant factors that can contribute to the risk of falling into poverty. On the other hand, risk diversification is more relevant to individuals with surplus income or investments. For people without investments, the concept of risk diversification is less applicable, as they do not face the same level of financial risk as those with investments. Conversely, individuals without investments often rely on stable sources of income, such as wages, salaries, or government benefits, which are less susceptible to market fluctuations than investments such as stocks and bonds. Therefore, the immediate impact of risk diversification may be limited for individuals in poverty compared to the direct relevance of other concepts. Indeed, risk diversification is the least understood concept, with only 35% of adults answering correctly (Klapper & Lusardi, 2020 ).

5.5 Mediation Analysis

This sub-section examines possible mediating channels in the relationship between financial literacy and poverty. Two mediating channels are considered: bank account ownership and formal savings. To do so, we follow the procedure outlined in Barkat et al. ( 2023 ) and Alesina and Zhuravskaya ( 2011 ). The procedure imposes two conditions for bank account ownership and formal savings to serve as mediating channels. The first condition, known as the correlation condition , stipulates that financial literacy must be significantly correlated with bank account ownership and formal savings. The second condition, known as the magnitude condition , requires the magnitude of the coefficient of financial literacy to decrease when bank account ownership and formal savings are incorporated into the model with poverty as the dependent variable. Equations ( 1 ), ( 3 ) and ( 4 ) are used to verify the mediating channels.

where \(i\) represents the respondent. \(Poverty_{i}\) , \(Finlit_{i}\) , \(X_{i}\) and \(Y_{i}\) are poverty status, financial literacy score, the matrix of control variables and the matrix of country dummies, respectively. \(Mediators_{i}\) is the matrix of bank account ownership dummy (1 if the respondent owns a bank account, 0 if otherwise) and formal savings dummy (1 if the respondent saved at a formal institution in the past 12 months, 0 if otherwise).

The results of the correlation between financial literacy and mediators, as specified in Eq. ( 3 ), are presented in Table  13 . Results presented in Columns 1 and 2 suggest that financial literacy significantly and positively correlates with bank account ownership and formal savings. Next, the results of the magnitude condition, as specified in Eqs. ( 1 ) and ( 4 ), are reported in Table  14 . The magnitude of the coefficient of financial literacy decreases as bank account ownership and formal savings are incorporated into the model (Columns 1–3). As such, bank account ownership and formal savings are qualified as mediating variables in the association between financial literacy and poverty, supporting Hypothesis 2. Indeed, financial literacy encourages desirable financial behaviours (Grohmann et al., 2018 ), which may lead to a decrease in the probability of falling into poverty.

6 Discussions

We have discovered a negative association between financial literacy and the likelihood of falling into poverty across 113 countries globally. Furthermore, we provide evidence supporting a causality from financial literacy to poverty reduction by adopting probit estimations with Gaussian copula terms. Overall, our findings suggest that financial literacy can serve as a pivotal instrument in the process of tackling poverty worldwide. Interestingly, financial literacy is found to have a heterogeneous association with poverty in different demographic groups, socioeconomic groups, regions, and country income levels. Moreover, we demonstrate that desirable financial behaviours, such as account ownership and formal savings, serve as the mediating variables in the relationship between financial literacy and poverty. This sub-section will further discuss and provide possible explanations for these findings.

To begin with, we will provide possible explanations for the mitigating effects of financial literacy on poverty. Regarding the underlying mechanisms through which financial literacy can reduce poverty, the empirical evidence is still relatively scarce. However, there are several potential mechanisms through which financial literacy can affect poverty. On the one hand, as mentioned in Sect.  2.3 , financial literacy positively influences account ownership and usage, formal savings, formal borrowing, stock participation, portfolio performance, insurance usage, debt management ability and retirement planning. Furthermore, empirical analysis from this study verifies the mediating role of account ownership and formal savings in the relationship between financial literacy and poverty.

On the other hand, these impacts correlate with poverty reduction in multifaceted ways. First, savings facilitate escape from poverty by smoothing consumption and financing productive investments (Karlan et al., 2014 ; Pomeranz & Kast, 2022 ), preventing indebtedness and debt-trap situations (Lister, 2006 ). Especially those equipped with emergency savings possess the advantageous ability to shield themselves from prolonged financial hardships resulting from adverse economic events (Diwakar & Shepherd, 2022 ; Shah et al., 2012 ), thereby attaining financial resilience, reducing the poverty risk (Hasler et al., 2018 ; Lusardi et al., 2011 ). Second, insurance defences against the risk of future poverty among customers (Koomson et al., 2020a ), improving risk-taking and managing capacities (Hong et al., 2020 ; Wang et al., 2022 ) to accumulate more in the financial market and entrepreneurship, taking great steps in the poverty alleviation process (Bucher-Koenen & Ziegelmeyer, 2014 ; Guiso & Viviano, 2015 , Klapper et al., 2013 ). Third, shifting lending behaviour from informal sources to formal institutions is also associated with eliminating irrational economic behaviours and financial constraints, facilitating households' escape from poverty (Sarthak & Ashish, 2012 ). Fourth, implementing effective debt management also helps reduce the likelihood of over-indebtedness (Gathergood, 2012 ), mortgage delinquency, and default (Gerardi et al., 2013 ). The fifth mechanism entails the advantages of heightened demand for bank accounts and debit cards. While Kefela ( 2011 ) exhibits that having an account at a bank or other financial institution is an important first step for financially literate people to participate in the financial system, Lusardi and Messy ( 2023 ) assert the influence of this participation on the efficiency and soundness of financial systems. As the financial system improves with more financially literate participants, it facilitates economic growth and alleviates poverty in middle- and high-income countries (Dhrifi, 2015 ). Sixth, Setor et al. ( 2021 ) examine data from 111 developing countries from 2010 to 2018, conclusively identifying digital transactions as a valuable tool in mitigating corruption and poverty by enhancing transparency, given the bidirectional causality between corruption and poverty (Han et al., 2022 ; Justesen & Bjørnskov, 2014 ). Seventh, asset and livelihood diversification is confirmed to have a negative association with poverty (Martin & Lorenzen, 2016 ). Eighth, entrepreneurship, viewed through different lenses, addresses poverty by addressing resource scarcity (remediation), social exclusion (reform), and challenging capitalist tenets (revolution) (see Sutter et al., 2019 for a review of related literature). Ninth, the reduction of anxiety among individuals can also help them escape from the cyclic nature of poverty—mental disorder (Anakwenze & Zuberi, 2013 ; Lund et al., 2011 ). Finally, effective retirement plans are also associated with increased wealth accumulation and poverty alleviation, particularly during old age (Lusardi & Mitchell, 2011b ; Behrman et al., 2012 ). Overall, the alleviating effect of financial literacy on poverty may be explained through many mechanisms, including savings, emergency funds, insurance usage, lending from formal institutions, debt management, usage of bank accounts and debit cards, digital transactions, asset diversification, entrepreneurship, and retirement plans.

7 Conclusions and Policy Implications

Our study explores how financial literacy affects the likelihood of individuals falling into poverty worldwide. Our analyses confirm that financial literacy significantly and negatively affects poverty. This result remains largely unchanged across different socio-demographic groups, regions, and country income levels, implying that our results can be applicable in various contexts. The coefficients of financial literacy are still statistically significant and consistent in terms of signs across robustness tests, including (i) probit models with Gaussian copula terms (addressing endogeneity concerns), (ii) multilevel probit models (considering variations across countries) and (iii) the Rubin’s ( 1974 ) causal model. Moreover, we find a notable heterogeneity in the impacts of financial literacy across subsamples. For demographic groups, the negative correlation between financial literacy and poverty is more pronounced among females, older individuals, and married individuals than their counterparts (males, young individuals, and unmarried individuals). In socioeconomic groups, residents of rural areas, those unemployed, and individuals with or without a primary degree are likely to derive greater benefits from financial literacy compared to their counterparts in the respective dimensions. Across regions, those living in East Asia, the Pacific, and Sub-Saharan Africa demonstrate the first and second largest decreases in the likelihood of poverty, with the same increase in financial literacy. Meanwhile, the coefficient of financial literacy turns out to be statistically insignificant in South Asia, the Middle East & North Africa, suggesting that financial literacy may not have any effect on poverty. Financial literacy has the most substantial impact on reducing the likelihood of poverty among citizens in lower-middle-income and low-income countries. Conversely, its association with the risk of poverty among individuals in high-income countries is the lowest.

Policy implications have emerged based on these insightful findings. First, governments should implement comprehensive financial education programs targeting various socio-demographic groups or incorporate financial topics into school curriculum. These programs should cover essential topics in finance, such as inflation, compound interest, risk diversification and debt management. Second, governments may consider providing funds for financial education initiatives such as community-based workshops, online courses, and financial educational materials to reach a broad audience. Moreover, financial literacy can serve as a powerful instrument to mitigate disparities in poverty rates among females, the elderly, the unmarried, rural residents, the unemployed, individuals with lower education levels, inhabitants in East Asia and Pacific and Sub-Saharan Africa, and those in lower-middle and low-income countries due to its larger association with poverty reduction in these groups compared to their counterparts. Therefore, these groups should receive targeted attention from governments to enhance their financial literacy levels and address poverty and disparities in poverty rates. In particular, we suggest specific policy implications that governments can take into consideration.

While females, the elderly, and the separated or divorced are the most beneficiaries of financial literacy in poverty reduction, their awareness and conditions to make use of these advantages are limited, given that they tend to be biased as they should not and cannot make sound financial decisions. That is, policymakers need to simultaneously break down social stereotypes about their financial ability and facilitate their financial literacy improvement. On the one hand, more research about the financial ability of people with these demographic factors should be implemented and widely popularized to dispel stereotypes and provide evidence-based insights. Popularization can be achieved through continuous dialogue and awareness campaigns in educational institutions, workplaces, and online platforms, ensuring universality in access. Additionally, celebrating the achievements of women, the elderly, and unmarried individuals who leverage their financial knowledge to build wealth and safeguard assets is crucial. Their success stories should be prominently featured in media and journals as exemplary cases, inspiring others and challenging prevailing stereotypes. This concerted effort contributes to a cultural shift that recognizes and values experiences and perspectives in the financial decision-making of females, people aged above 70, and the unmarried. On the other hand, policymakers should make more effort to facilitate better financial literacy among these target groups. As financial education is a fundamental measure to increase financial literacy, governments may expand policies to stimulate people's participation and interest in financial education programs. For example, people with unfavourable demographic factors could receive free government-sponsored financial education, offer tax incentives or subsidies to residents participating in financial education, integrate financial literacy requirements into welfare programs, provide additional benefits or incentives for participants in financial education, and so on. Through the implementation of diverse and targeted measures, governments have the potential to significantly enhance the representation of females, individuals over 70, and those who are separated or divorced in the financial market. This, in turn, can contribute to reducing poverty levels and foster a higher rate of economic development.

Recognizing the amplified association between financial literacy and poverty reduction in specific socioeconomic groups, governments may prioritize allocating more resources to financial literacy programs that target residents with low socioeconomic status (rural, unemployed, and low-education-level ones). Also, to ensure that the content is relevant and accessible, financial literacy programs should be customized to address the unique financial circumstances of individuals in rural areas, the unemployed, and those with low education levels. Moreover, given that residents of low socioeconomic status are usually beneficiaries of social assistance programs, financial education components should be integrated into existing programs, such as unemployment benefits or rural welfare-oriented programs. In this way, countries can achieve sustainable poverty reduction instead of temporarily reducing poverty. By empowering individuals to make informed financial decisions in the long term, this approach addresses immediate financial needs, temporarily reduces poverty, and aims to reduce poverty sustainably.

Given these heterogeneous associations for residents in low-income countries and those in East Asia and Pacific and Sub-Saharan Africa, officials of these nations have the privilege of bridging the gap with other nations in eradicating poverty and moving up the economic ladder. To capitalize on this advantage, policymakers in East Asia and the Pacific, Sub-Saharan Africa, and low-income countries may consider enhancing financial literacy as an important and urgent national task that requires prioritizing attention and resources. Concurrently, the government should increase investments in developing financial infrastructure while implementing stringent regulations to foster a secure and readily accessible financial market for individuals and businesses. National strategies must be implemented consistently, effectively, and creatively to turn their potential into reality. For example, Vietnam's Prime Minister has approved the National Financial Inclusion Strategy until 2025. It clearly states the viewpoints, goals, tasks, and solutions to promote access and usage of financial goods and services for all residents and businesses, with a focus on those living in rural areas, low-income people, women, and other disadvantaged groups (Viet Nam Government Portal, 2022 ).

Data Availability

The data underlying this article cannot be shared publicly due to its proprietary nature, as stipulated by the survey owners.

This dataset is proprietary. To request access, please visit https://gflec.org/initiatives/sp-global-finlit-survey/ .

This dataset is publicly available at: https://www.worldbank.org/en/publication/globalfindex .

This dataset is proprietary. To request access, please visit https://www.gallup.com/analytics/ .

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Lang, N.D., Tran, H.M., Nguyen, G.T. et al. An Untapped Instrument in the Fight Against Poverty: The Impacts of Financial Literacy on Poverty Worldwide. Soc Indic Res (2024). https://doi.org/10.1007/s11205-024-03404-w

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Amidst a global wave of corporate pledges to decarbonize or reach net-zero emissions, a system for verifying actual greenhouse gas reductions has never been more important. Context Labs, founded by former MIT Sloan Fellow and serial entrepreneur Dan Harple SM ’13, is rising to meet that challenge with an analytics platform that brings more transparency to emissions data.

The company’s platform adds context to data from sources like equipment sensors and satellites, provides third-party verification, and records all that information on a blockchain. Context Labs also provides an interactive view of emissions across every aspect of a company’s operations, allowing leaders to pinpoint the dirtiest parts of their business.

“There’s an old adage: Unless you measure something, you can’t change it,” says Harple, who is the firm’s CEO. “I think of what we’re doing as an AI-driven digital lens into what’s happening across organizations. Our goal is to help the planet get better, faster.”

Context Labs is already working with some of the largest energy companies in the world — including EQT, Williams Companies, and Coterra Energy — to verify emissions reductions. A partnership with Microsoft, announced at last year’s COP28 United Nations climate summit, allows any organization on Microsoft’s Azure cloud to integrate their sensor data into Context Lab’s platform to get a granular view of their environmental impact.

Harple says the progress enables more informed sustainability initiatives at scale. He also sees the work as a way to combat overly vague statements about sustainable practices that don’t lead to actual emissions reductions, or what’s known as “greenwashing.”

“Just producing data isn’t good enough, and our customers realize that, because they know even if they have good intentions to reduce emissions, no one is going to believe them,” Harple says. “One way to think about our platform is as antigreenwashing insurance, because if you get attacked for your emissions, we unbundle the data like it’s in shrink-wrap and roll it back through time on the blockchain. You can click on it and see exactly where and how it was measured, monitored, timestamped, its serial number, everything. It’s really the gold standard of proof.”

An unconventional master’s

Harple came to MIT as a serial founder whose companies had pioneered several foundational internet technologies, including real-time video streaming technology still used in applications like Zoom and Netflix, as well as some of the core technology for the popular Chinese microblogging website Weibo.

Harple’s introduction to MIT started with a paper he wrote for his venture capital contacts in the U.S. to make the case for investment in the Netherlands, where he was living with his family. The paper caught the attention of MIT Professor Stuart Madnick, the John Norris Maguire Professor of Information Technology at the MIT Sloan School of Management, who suggested Harple come to MIT as a Sloan Fellow to further develop his ideas about what makes a strong innovation ecosystem.

Having successfully founded and exited multiple companies, Harple was not a typical MIT student when he began the Sloan Fellows program in 2011. At one point, he held a summit at MIT for a group of leading Dutch entrepreneurs and government officials that included tours of major labs and a meeting with former MIT President L. Rafael Reif.

“Everyone was super enamored with MIT, and that kicked off what became a course that I started at MIT called REAL, Regional Entrepreneurial Acceleration Lab,” Harple says. REAL was eventually absorbed by what is now REAP — the Regional Entrepreneurship Acceleration Program, which has worked with communities around the world.

Harple describes REAL as a framework vehicle to put his theories on supporting innovation into action. Over his time at MIT, which also included collaborating with the Media Lab, he systematized those theories into what he calls pentalytics, which is a way to measure and predict the resilience of innovation ecosystems.

“My sense was MIT should be analytical and data-driven,” Harple says. “The thesis I wrote was a framework for AI-driven network graph analytics. So, you can model things using analytics, and you can use AI to do predictive analytics to see where the innovation ecosystem is going to thrive.”

Once Harple’s pentalytics theory was established, he wanted to put it to the test with a company. His initial idea for Context Labs was to build a verification platform to combat fake news, deepfakes, and other misinformation on the internet. Around 2018, Harple met climate investor Jeremy Grantham, who he says helped him realize the most important data are about the planet. Harple began to believe that U.S. Environmental Protection Agency (EPA) emissions estimates for things like driving a car or operating an oil rig were just that — estimates — and left room for improvement.

“Our approach was very MIT-ish,” Harple says. “We said, ‘Let’s, measure it and let’s monitor it, and then let’s contextualize that data so you can never go back and say they faked it. I think there’s a lot of fakery that’s happened, and that’s why the voluntary carbon markets cratered in the last year. Our view is they cratered because the data wasn’t empirical enough."

Context Labs’ solution starts with a technology platform it calls Immutably that continuously combines disparate data streams, encrypts that information, and records it on a blockchain. Immutably also verifies the information with one or more third parties. (Context Labs has partnered with the global accounting firm KPMG.)

On top of Immutably, Context Labs has built applications, including a product called Decarbonization-as-a-Service (DaaS), which uses Immutably’s data to give companies a digital twin of their entire operations. Customers can use DaaS to explore the emissions of their assets and create a verification or certificate of the quantified carbon intensity of their products.

Putting emissions data into context

Context Labs is working with oil and gas companies, utilities, data centers, and large industrial operators, some using the platform to analyze more than 3 billion data points each day. For instance, EQT, the largest natural gas producer in the U.S., uses Context Labs to verify the carbon intensity of its operational assets and refine its overall GHG emissions mitigation strategy. Other customers include the nonprofits Rocky Mountain Institute and the Environmental Defense Fund.

“I often get asked how big the total addressable market is,” Harple says. “My view is it’s the largest market in history. Why? Because every country needs a decarbonization plan, along with instrumentation and a digital platform to execute, as does every company.”

With its headquarters in Kendall Square in Cambridge, Massachusetts, Context Labs is also serving as a test for Harple’s pentalytics theory for innovation ecosystems. It also has operations in Houston and Amsterdam.

“This company is a living lab for pentalytics,” Harple says. “I believe Kendall Square 1.0 was factory buildings, Kendall Square 2.0 is biotech, and Kendall Square 3.0 will be climate tech.”

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Project 2025 decried as racist. Some contributors have trail of racist writings, activity

They include richard hanania, whose pseudonymous writings for white supremacist sites were uncovered last year..

Former President Donald Trump has spent weeks distancing himself from Project 2025, a sprawling 900-plus page manifesto that seeks to create a blueprint for the next Trump presidency.

Billed as a vision built by conservatives for conservatives, the effort “dismantles the unaccountable Deep State, taking power away from Leftist elites and giving it back to the American people and duly-elected President,” according to its website.  

But for months commentators and academics have been sounding the alarm on Project 2025. The effort, they say, is a deeply racist endeavor that actually is aimed at dismantling many protections and aid programs for Americans of color.

“Really, it's kind of a white supremacist manifesto,” said Michael Harriot, a writer and historian who wrote an article earlier this month titled: “I read the entire Project 2025. Here are the top 10 ways it would harm Black America.”

And a closer look at the named contributors to Project 2025 adds to the concern: A USA TODAY analysis found at least five of them have a history of racist writing or statements, or white supremacist activity.

They include Richard Hanania, who for years wrote racist essays for white supremacist publications under a pseudonym until he was unmasked by a Huffington Post investigation last year. 

Failed Virginia GOP Senate candidate Corey Stewart, another named contributor, has long associated with white supremacists and calls himself a protector of America’s Confederate history tasked with “taking back our heritage.” 

One Project 2025 contributor wrote in his PhD dissertation that immigrants have lower IQs than white native citizens, leading to “underclass behavior.” Another dropped out of contention for a prestigious role at the Federal Reserve amid controversy over a racist joke about the Obamas. 

The presence of contributors to Project 2025 who have published racist or offensive tropes comes as no surprise to academics and commentators who have been sounding the alarm on the endeavor for months.

The plan calls for the abolition of diversity, equity and inclusion programs in the federal government. It would severely limit the mailing of abortion pills and disband the Department of Education. It would replace the Department of Homeland Security with a new, more powerful border and immigration enforcement agency to choke immigration . It would also curtail or disband programs that experts say greatly benefit communities of color, including the Food Stamp and Head Start programs. 

“Project 2025 is a plan about how to regulate and control people of color, including how they organize, work, play and live,” said Arjun Sethi, a civil rights lawyer and adjunct professor of law at Georgetown Law. “It seeks to regulate what they do with their bodies, how they advocate for their rights, and how they build family and community — all while disregarding the historical injustices and contemporary persecution they have experienced.”

What is Project 2025? Inside the conservative plan Trump claims to have 'no idea' about.

It’s not clear how much influence the contributors USA TODAY identified had on the creation of the Project 2025 manifesto. They are listed among scores of contributors to the document, and none would agree to an interview for this story.

But even among the broader collection of think tanks, nonprofits and pundits on the author list, others have past controversies on the issue of race. Seven of the organizations on Project 2025’s Advisory Board have been designated as extremist or hate groups by the Southern Poverty Law Center, according to a May report from Accountable.us, a nonpartisan organization that tracks interest groups in Washington, D.C. 

This proliferation of organizations and individuals with racist modus operandi is by design, not accident, Harriot said.

“One of the things that you see when you read Project 2025 is not just the racist dog whistles, but some ideas that were exactly lifted from some of the most extreme white supremacists ever,” Harriot said. 

After multiple requests from USA TODAY, the Heritage Foundation declined to address questions about the Project 2025 contributors and their past statements.

Project 2025 contributor wrote for white supremacist websites

Hanania is a right-wing author and pundit who has built a reputation among Republicans as an “anti-woke crusader.” 

Before he became a favorite of prominent conservatives – including Sen. JD Vance, R-Ohio, who is now Trump’s pick for vice president – Hanania was pushing a far more extreme version of his right-wing views.    

An investigation last year by the Huffington Post unmasked Hanania as having written under a pseudonym for websites connected to the “alt-right,” the white supremacist movement that flared up before and during the first Trump presidency.

In the early 2010s, writing under the pen name “Richard Hoste,” Hanania “identified himself as a ‘race realist.’” Huffington Post reported last August. “He expressed support for eugenics and the forced sterilization of ‘low IQ’ people, who he argued were most often Black. He opposed ‘miscegenation’ and ‘race-mixing.’ And once, while arguing that Black people cannot govern themselves, he cited the neo-Nazi author of ‘The Turner Diaries,’ the infamous novel that celebrates a future race war.”

Hanania acknowledged writing the posts under a pseudonym and, since then, has only partly renounced his past. Two days after the Huffington Post exposé, in a post on his website titled “Why I Used to Suck, and (Hopefully) No Longer Do,” Hanania wrote “When I was writing anonymously, there was no connection between the flesh and blood human being who would smile at a cashier or honk at someone in traffic, and the internet ‘personality’ who could just grow more rabid over time.”

Vance’s connection to Hanania was documented in a 2021 interview with conservative talk show host David Rubin — two years before Hanania began denouncing his racist past — when Vance described Hanania as a “friend” and a “really interesting thinker.”

Vance and Hanania have also interacted several times on X, formerly known as Twitter, liking and commenting on each other’s posts.

Richard Spencer, a white supremacist credited with creating the alt-right moniker, published several of Hanania’s articles on the website AlternativeRight.com, including one in which Hanania wrote “If the races are equal, why do whites always end up near the top and blacks at the bottom, everywhere and always?”  

In an interview this month, Spencer told USA TODAY that while Hanania may have moderated some of his views, “I think it’s very clear that Richard is a race realist and eugenicist.” The term eugenicist refers to proponents of eugenics, the belief that the genetic quality of the human race can be improved through certain practices — practices viewed by many as scientific racism.

Hanania did not respond to repeated requests for comment.

A Confederate cheerleader and promoting the ‘Great Replacement’ theory

In a 2017 speech at the “Old South Ball” in Danville, Va., Stewart, an attorney who would become the 2018 Republican candidate for the U.S. Senate, told the assembled crowd he was proud to stand next to a Confederate flag: 

“That flag is not about racism, folks, it’s not about hatred, it’s not about slavery, it is about our heritage,” Stewart said. At the same event, he called Virginia “the state of Robert E. Lee and Stonewall Jackson.”

According to a 2018 New York Times profile of Stewart, white supremacists volunteered on the then-Senate candidate’s campaign. “Several of his aides and advisers have used racist or anti-Muslim language, or maintained links to outspoken racists like Jason Kessler ” – who helped organize the white supremacist Unite The Right rally in Charlottesville, Virginia – the Times reported. 

Stewart did not respond to an email seeking comment. Kessler did not respond to a phone call.

At least three contributors to Project 2025 have supported the racist “Great Replacement” theory, which contends that powerful Democrats and leftists are conspiring to change the demographics of the United States by turning a blind eye to, or even encouraging, illegal immigration. 

Michael Anton, a former senior national security official in the Trump administration, wrote in a pseudonymous essay published in 2016 that “The ceaseless importation of Third World foreigners with no tradition of, taste for, or experience in liberty means that the electorate grows more left, more Democratic, less Republican, less republican, and less traditionally American with every cycle. As does, of course, the U.S. population.”     

Anton has also written several essays, including one for USA TODAY, arguing to end birthright citizenship. His arguments have been widely criticized as factually incorrect and misleading. In an opinion piece for the Washington Post, Tufts University politics professor Daniel Drezner called them “ very racist .”  

Anton did not respond to a request for comment.

Another contributor is Stephen Moore, who in 2019 withdrew his name for consideration for the Federal Reserve Board amid scrutiny for his misogynistic and racist jokes and commentary.

Moore, who had made a joke about Trump removing the Obamas from public housing when he took office, was widely mocked when he later tried to clear up the joke in a television interview. The fallout, combined with concerns about Moore’s history of writing articles viewed as disparaging toward women, led him to withdraw his name for consideration.   

Moore did not respond to a request for comment.

The 2009 PhD thesis of Project 2025 contributor Jason Richwine was titled, “ IQ and Immigration Policy .” The thesis includes statements such as: “No one knows whether Hispanics will ever reach IQ parity with whites, but the prediction that new Hispanic immigrants will have low-IQ children and grandchildren is difficult to argue against.”

Richwine resigned from his position at the Heritage Foundation in 2013 amid controversy over his research. He now works at  the Center For Immigration Studies. The paper, and Richwine’s defense of it, were widely decried as racist , bigoted and scientifically incorrect .   

It didn’t help Richwine that his thesis was uncovered in the midst of controversy over an immigration study he co-authored that was roundly criticized by liberals and conservatives alike.  

“Had he not just argued, in an extremely tendentious fashion, that Hispanic immigrants are, on the whole, parasites, he might have endured public criticism of his dissertation,” read an analysis in The Economist . “Had he not in his dissertation argued that Hispanic immigration ought to be limited on grounds of inferior Hispanic intelligence, he would have endured the firestorm over the risible Heritage immigration study.”

Richwine did not respond to a request for comment.

“The fact that they consulted individuals with such abhorrent views to develop this plan is further evidence of just how un-American these proposals are,” Tony Carrk, executive director of Accountable.us told USA TODAY. “The idea that the next conservative administration might replace 50,000 government experts with extremists like this should concern every American.”

Trump’s connections to Project 2025

At a campaign rally in Michigan earlier this month, Trump told the crowd that Project 2025 is “seriously extreme.”

“Some on the severe right, came up with this Project 25,” Trump said. “ I don’t even know, some of them I know who they are, but they’re very, very conservative. They’re sort of the opposite of the radical left.”

In a post on his social media platform Truth Social, Trump had previously distanced himself from the effort.

“I have no idea who is behind it,” he wrote on July 5. “I disagree with some of the things they’re saying, and some of the things they’re saying are absolutely ridiculous and abysmal.”

But reports show at least 31 of the 38 official authors and editors of Project 2025 have a connection to the former president and GOP presidential candidate. 

Vance, who Trump announced as his running mate earlier this month, also has connections to Project 2025. He wrote the foreword for a book being released later this year by Kevin Roberts, one of the manifesto's key architects.

“Never before has a figure with Roberts’s depth and stature within the American Right tried to articulate a genuinely new future for conservatism,” Vance wrote in a review of the book,  published on Amazon, which has since been removed.

Trump has pointed to his own policy manifesto – “ Agenda 47 ,” so named because the next U.S. president will be its 47th – as evidence that he doesn’t plan to use Project 2025 if he wins in November. Agenda 47 focuses on the same broad issues as Project 2025: Education, immigration and crime, and also tackles the LGBTQ+ community and welfare programs. 

The plans differ in some ways. Agenda 47 doesn’t mention abortion once, for example, while abortion is a focus of Project 2025, which calls on the FDA to reverse its approval of abortion drugs and severely limit the mailing of abortion pills. 

Harriot, the author who has closely studied the document, described Project 2025 as the “employee manual” for a future Trump administration. Agenda 47 is the public-facing statement of the former president’s political intentions, Harriot said, but Project 2025 is where the details are.

“There’s some cognitive dissonance,” Harriot said. “Trump doesn’t get elected by people who are just outwardly racist, and being associated with Project 2025 would dismantle his plausible deniability, because it's so blatantly racist.”