On Poverty Traps and Equilibria in Growth Models
DOI:
https://doi.org/10.6000/1929-7092.2013.02.3Keywords:
Unstable equilibria, growth modelsAbstract
Abstract: We show that, contrary to a widely spread error, when the savings and the population growth rates are constant, an unstable equilibrium cannot exist in a neoclassical model, because it would imply an increasing average productivity of capital and therefore a negative marginal productivity of labor. As a consequence, a poverty trap, a dire reality, cannot be explained by such an unstable equilibrium, nor cannot it be eliminated by a capital "big-push". We finally give necessary conditions for an economy to escape a poverty trap.References
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Thanh, Nam Phan and Mach Nguyet Minh, ""Proof of a Conjecture on General Means"", Journal of Inequalities in Pure and Applied Mathematics, Volume 9, No 3, Article 86, 2008.
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http://dx.doi.org/10.2307/2109526
Klump, Rainer and Olivier de La Grandville, ""Economic Growth and the Elasticity of Substitution: Two theorems and Some Suggestions"", The American Economic Review, 90, No 1, pp. 282-291, 2000.
http://dx.doi.org/10.1257/aer.90.1.282
La Grandville, Olivier de, ""In Quest of the Slutsky Diamond"", The American Economic Review, 79, No 3, pp. 468-481, 1989.
La Grandville, Olivier de, Economic Growth – A Unified Approach, with two special contributions by Robert Solow, Cambridge University Press, 2009.
—– and Robert M. Solow, ""A Conjecture on General Means"", Journal of Inequalities in Pure and Applied Mathematics, Volume 7, No 1, Article 3, 2006.
Sachs, Jeffrey D., John W. McAthur, Guido Schmidt-Traub, Margaret Kruk, Chandrika Bahadur, Michael Faye and Gordon McCord (2004), “ Ending Africa’s Poverty Trap"", Brookings Papers on Economic Activity, 1, pp. 117-240.
http://dx.doi.org/10.1353/eca.2004.0018
Thanh, Nam Phan and Mach Nguyet Minh, ""Proof of a Conjecture on General Means"", Journal of Inequalities in Pure and Applied Mathematics, Volume 9, No 3, Article 86, 2008.
Yuhn, Ky Hyang, ""Economic Growth, Technical Change Biases, and the Elasticity of Substitution: a Test of the de La Grandville Hypothesis"", The Review of Economics and Statistics, LXIII, No 2, 1991, pp. 340-346.
http://dx.doi.org/10.2307/2109526
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Published
2013-01-08
How to Cite
Grandville, O. de L. (2013). On Poverty Traps and Equilibria in Growth Models. Journal of Reviews on Global Economics, 2, 25–30. https://doi.org/10.6000/1929-7092.2013.02.3
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