Global Journal of Human Social Science, E: Economics, Volume 22 Issue 2

“Until society can find ways of raising their educational level, improving their occupational opportunities, increasing their income, and reducing the discrimination against them — in short, until poverty itself is eradicated — only limited solutions to their problems as consumers can be found”. (Caplovitz, 1963, p. 192) Since it was inaugurated by Caplovitz (1963), until Prahalad (2005), at least 8 articles in scientific journals were written with the expression “the poor pay more” in the title [7] , under the same approach – characterized by the analysis of each market separately – of what the latter author would call the term “poverty penalty”. Contributions in this line of analysis have multiplied from the work of Prahalad (2005), especially after June 12, 2006, when the Inter-American Development Bank (IDB) launched the Building Opportunity for the Majority initiative, based on the concept of poverty penalty. This initiative would increasingly guide IDB lending. Another great incentive to increase the discussion on the penalization of poverty came less than a year later, when on May 25, 2007, the Advisory Committee on Voluntary Foreign Aid of the United States Agency for International Development (USAID) guided that the projects adopt approaches based on the poverty penalty concept. Many technical publications and not just peer-reviewed scientific articles have been published since then. Considering, however, only peer-reviewed scientific articles, in a search carried out in the CAPES database, five articles were found with the term “the poor pay more” as part of the title and five articles with the term “poverty penalty” were found published in a more recent period, equivalent to almost a third of the period between the publications of Caplovitz (1963) and Prahalad (2005) and after the latter. These publications, different from those of Caplovitz (1963) and Prahalad (2005), but of the same line of analysis as these (considering each market separately), contributed to the poverty penalty concept. ii. Completing the concept and focusing on the issues that concern them Among the works prior to Prahalad (2005) and the IDB and USAID initiatives mentioned above, Williams (1977), based on what has already been indicated as being said by Caplovitz (1963) distinguishes between two problems that together form what was defined earlier in this article as the poverty penalty concept. In your words, “This book is about one of the rents in the threadbare coat that covers poverty: the fact that our systems - in private commerce, in the creation of wealth, even in the provision of public services - often seem to conspire to visit a further disadvantage on poor people. Not only do they have less money to spend than richer ones, they also get worse value for their money (or for money spent on them)”. (Williams: 1977, p. 1) This double penalty, called by the National Consumer Council “consumer detriment”, can also be understood, more broadly, under the term “double jeopardy”, which involves several issues, including those not directly linked to poverty. Both terms appear in scientific publications. In line with the concept hitherto seen as a broad penalization of poverty – which associates the higher price paid by the poor with a worse quality of similar goods consumed by the rich – the idea of “consumer detriment”, or “double jeopardy” reveals a central aspect of the concept of the penalty of poverty not addressed so far, that is, the fact that the poor have less money to spend on goods for which they will also suffer the poverty penalty. The precedence of those two concepts in relation to the poverty penalty and the way in which they contain it requires that, in order for them to be understood under the same concept – as proposed here, the penalization of poverty – this concept now means what those first ones represent. Williams (1977) also highlights the possible determinants of the penalization of poverty, some of which are found in the literature, classifying them. Such classification allows, at the same time, to differentiate and treat separately the ways in which the penalty of poverty presents itself, from its determinants. Mendoza (2011), for example, makes this distinction in the excerpt reproduced below. “Conceptualising the poverty penalty in this way offers a more nuanced interpretation of both the subtle (eg quality- and price-related poverty penalties) as well as more direct (eg non-access, non-usage and catastrophic spending burdens) forms of exclusion and marginalization faced by the poor within the context of the market system. The literature offers a number of potential explanations for the poverty penalty, and this paper discusses several which seem especially salient for developing countries: (a) factors related to size and store effects; and (b) factors related to market failures, notably imperfect information, missing markets and switching costs”. (Mendoza, 2011, p. 2) Since Williams (1997), other classifications have been published in scientific works. Each classifies the penalty of poverty, sometimes in terms of its forms, sometimes in terms of its causes. They are made according to the objective of each work, so that each classification is different from the others and, alone, do not cover all aspects, characteristics, or even causes and forms of the concept. They, however, have the merit of systematizing the contents of the state of the art related to the criteria with which the concept is classified. In this sense, in line with the market-based characteristic of the poverty penalty concept raised in this article, Hirsch (2019) interprets the poverty penalty Volume XXII Issue II Version I 24 ( ) Global Journal of Human Social Science - Year 2022 © 2022 Global Journals E Poverty Penalty: A Market-Based Review