> For the complete documentation index, see [llms.txt](https://research.ambitiousimpact.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://research.ambitiousimpact.com/explainers-and-house-views/live-house-views/increasing-incomes-and-supporting-growth-in-low-and-middle-income-countries-lmics.md). # Increasing incomes (and supporting growth) in Low and Middle Income Countries (LMICs) Contributors: Filip Murár ## Background Increasing the incomes of people living in low- and middle-income countries (LMICs) is fundamental for poverty reduction and improving well-being. Higher incomes enable individuals and families to meet their basic needs, access better healthcare and education, and invest in productive assets. This can create a virtuous cycle, leading to improved living standards, enhanced economic opportunities, and greater resilience to shocks. Higher incomes increase utility through greater consumption possibilities. This point has been posited by classical economic models ([Varian, 2014](https://faculty.ksu.edu.sa/sites/default/files/microeco-_varian.pdf)) and is supported by extensive empirical evidence, with studies finding a robust relationship between income and life satisfaction (a measure of subjective well-being; e.g., [Layard et al., 2008](https://www.sciencedirect.com/science/article/abs/pii/S0047272708000248); [Stevenson & Wolfers, 2013](https://www.aeaweb.org/articles?id=10.1257/aer.103.3.598)). The figure below shows that higher-income individuals report great life satisfaction within and across countries. Increasing incomes also supports beneficiaries’ agency. Money can be exchanged for any goods or services to obtain whatever an individual needs or wants the most at any moment. As such, income-focused interventions help lift beneficiaries out of poverty and lead the lives they desire. The world has made significant progress in increasing people’s incomes and decreasing poverty. Only 9% of the world’s population lives in extreme poverty, i.e., on less than $2.15 per day, compared with 38% in 1990 ([Hasell et al., 2022](http://hasell)). This demonstrates that change is possible. However, there is still much progress to be made. The above figures hide large regional inequalities as well as absolute increases in poverty in some regions. While extreme poverty in East Asia has dropped from 65% in 1990 to around 1% today, it has only decreased from 55% to 37% in sub-Saharan Africa ([Hasell et al., 2022](http://hasell)). Due to the rapidly growing population, the number of extremely poor people in sub-Saharan Africa has actually increased from 290 to 380 million ([Moatsos, 2021](https://ourworldindata.org/grapher/number-of-people-living-in-extreme-poverty-by-region-cbn)). Moreover, even those who escape extreme poverty are still typically very poor: 58% of the world's population live on less than $10 daily ([Roser, 2023](https://ourworldindata.org/extreme-poverty-in-brief)). ## AIM’s Motivation In this year’s research, we wish to focus on income for a few reasons: * To capture a variety of moral views. Without a consensus on what philosophical framework to use, we are keen for AIM to create a portfolio of charities that maximize impact across various views. It is plausible that increasing income is the most important issue under some ethical views. * To date, we may have under-investigated income-promoting interventions and over-invested in health promotion (as have arguably other impact-oriented organizations; [Dickson et al., 2023](https://rethinkpriorities.org/publications/livelihood-interventions)). * We are concerned that our normal focus on health overweights the value of death. Under various philosophical views, improving the quality of life is more important than extending lives ([Plant et al., 2022](https://forum.effectivealtruism.org/posts/JgqEqsa6iAtqGLYmw/the-elephant-in-the-bednet-the-importance-of-philosophy-when-1)). * Interventions that increase income by promoting economic growth may be especially promising. Most of the indicators of human well-being that people care about – income, health, agency, education, etc. – tend to be closely linked with the level of a country’s economic development. Therefore, even small increases in growth can have huge moral value ([Hillebrandt & Halstead, 2020](https://forum.effectivealtruism.org/posts/bsE5t6qhGC65fEpzN/growth-and-the-case-against-randomista-development)). * Internal track record. We have identified a number of promising interventions in this space to date without fully diving into this topic. ## Scope Interventions must predominantly increase incomes. Arguably, most development interventions – even those that primarily target outcomes such as health or human rights – increase people’s incomes to some extent. To limit the scope of this research, we are only considering ideas where we expect that the majority (>50%) of the value of the benefit is due to increased incomes. We are considering any intervention relevant if it improves incomes or increases economic growth. We can imagine income/growth interventions on a spectrum from: * Well-evidenced, focused on income interventions that can be justified with RCT data and increase individuals' consumption. Examples: Education, poverty graduation schemes. * Speculative, focused on economic growth: interventions that are mostly justified on high-level economic theory and could cause a transformative change to nations. Examples: policy change (e-procurement, free trade), financial stability think tank, urban development. Overall we expect we are more likely to recommend interventions towards the well-evidenced income-focused end of the spectrum. That said, the most robust intervention ideas will be those with both strong (e.g., RCT) evidence and supporting economic theory, perhaps towards the middle of the spectrum. Interventions that redistribute income are in scope. Given the log-linear relationship between income and well-being, redistribution without changing overall GDP is of interest to us (since the loss of $1 to a rich person is less valuable than the gain of that $1 to a poor person). Health interventions that increase productivity and income via decreased morbidity, such as reducing lead exposure or deworming, are in scope. Health interventions that primarily prevent mortality are not in scope. Interventions may vary in the time horizon of their effect, with some providing immediate but time-bound benefits (such as cash transfers) and others generating delayed but long-term benefits (such as education). Note that we may reduce or expand the scope as needed to manage the number of ideas within this research round. ## Potential interventions Some example sub-causes we may consider include education, early childhood stimulation, adult skills training, entrepreneurship promotion, microfinance, cash transfers, within-country redistribution, poverty graduation schemes, labor mobility and migration, firm-level consulting, growth-oriented think tanks, increasing government efficiency, physical/digital infrastructure projects, rural and urban development, agriculture, and increasing productivity by decreasing morbidity (if >50% of the benefit is due to income). ## Metrics Our key metric is the number of years of doubled consumption (or ‘consumption doublings’). That is the increase in log2(consumption), times the benefit duration, summed across all intervention beneficiaries. This is because ultimately, what we care about is increasing people’s welfare. From this perspective, we prefer: 1. Looking at consumption rather than income per se. By consumption, we mean the resources used by an individual. 2. Measuring changes on a logarithmic scale. This is because the relationship between consumption and welfare appears roughly log-linear: Each consumption doubling is associated with a linear increase in reported well-being. This implies that a fixed income increase for impoverished people is more valuable than that for affluent individuals. For interventions that target governments rather than individuals, we will model their impact by again estimating the increases to individuals’ consumption. Where an intervention benefits both people’s health and their incomes, we use a conversion of 1 disability-adjusted life year (DALY) = 2.5 income doublings. ### Bar to beat We set our cost-effectiveness bar at roughly US$60 per income doubling (though a lower number is always better). This roughly aligns with the bars used by grantmakers such as [GiveWell](https://www.givewell.org/how-we-work/our-criteria/cost-effectiveness/cost-effectiveness-models), [Open Philanthropy](https://www.openphilanthropy.org/research/our-planned-allocation-to-givewells-recommendations-for-the-next-few-years/#id-our-higher-bar-for-global-health-and-wellbeing-giving), and [Founders Pledge](https://www.founderspledge.com/requests-for-funding). --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. 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