Drivers of Poverty Reduction in Lao PDR


Children walking home from school. Rural households with road access are 10% more likely to get out of poverty as better connectivity is associated with off-farm opportunities. 

Key Findings

Poverty continues to decline in Lao PDR

  • Poverty in Lao PDR declined from 33.5% to 23.2% in the last decade lifting half a million people out of poverty.
  • The country has met the Millennium Development Goals (MDGs) target of halving extreme poverty.
  • Improvements in citizens’ welfare are evident – the number of people with electricity has doubled and the proportion of those without a toilet halved.
  • Improved skills and knowledge, increased access to land, coupled with non-farm job creation were major drivers of poverty reduction.

However, poverty could have declined further had a large number of vulnerable households not fallen back into poverty.

  • Many people escaping poverty remain close or have slipped to the poverty line – about half of the poor in 2013 were not poor in 2008.
  • About 80% of the population in 2013 live on less than $2.5 per day and face a 10% chance of falling back into poverty.
  • Agriculture and health shocks are the main drivers of household vulnerability.
  • Farming households are twice as likely to fall back into poverty compared to non-farming households.

Higher poverty reduction in Lao PDR can be achieved by creating better economic opportunities for the poor and non-poor.

  • Creating jobs, increasing productivity, and improving the quality of jobs in the non-farm sector provides a pathway for reducing poverty.
  • Improving the business environment will be necessary to attract investment to create non-farm jobs and raise wages without hurting competitiveness.
  • Increasing investment in education is needed to provide people with the necessary skills to obtain good jobs outside agriculture and also improve the productivity of farmers.
  • Strengthening the social protection system is important to ensure sustainable poverty reduction, especially putting in place social welfare programs that target the vulnerable and the chronically poor. 

Poverty in Lao PDR: Achievements and Challenges