Escaping the poverty trap in a developing rural economy
AbstractIn this paper, we examine the economic policies that might allow a developing rural economy to escape from the poverty trap characterized by a subsistence level of per capita consumption in the long run. In our model where labour is combined to land available in fixed quantity to produce a homogeneous good, saving could be made through only having children, the number of which is an endogenous decision. We provide conditions under which the economy runs into a poverty trap, and proceed to analyse the relevant policies in this case. We demonstrate that an escape from this poverty trap is possible through a suitable technology transfer, or an appropriate child-rearing tax, but not with a foreign manufacturing sector, which increases only temporarily the labour income in this rural economy.
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Bibliographic InfoArticle provided by Canadian Economics Association in its journal Canadian Journal of Economics.
Volume (Year): 37 (2004)
Issue (Month): 1 (February)
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Postal: Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4
Web page: http://economics.ca/cje/
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- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
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