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Development of domestic markets and poverty reduction for poor developing economies

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  • Chyi, Yih-Luan
  • Hwang, Chun-Sin

Abstract

Constructing a model of structural change with household production, this paper finds two equilibrium paths: one path leads to a low-income steady state and the other to a high-income steady state. This paper shows that as long as the relative marginal productivity of manufactured goods in household production is high enough, a poor country may transform from a home-producing economy to a firm-producing one and eventually reaches a high standard of living. Is it empirically acceptable for us to claim that when a country starts with poorer pro-market infrastructures and institutions, she will be less likely to escape from poverty later on? This paper provides an empirical evidence of positive relationship between pro-market infrastructures and poverty reduction for poor developing countries.

Suggested Citation

  • Chyi, Yih-Luan & Hwang, Chun-Sin, 2011. "Development of domestic markets and poverty reduction for poor developing economies," Economic Modelling, Elsevier, vol. 28(1), pages 374-381.
    • Handle: RePEc:eee:ecmode:v:28:y:2011:i:1:p:374-381
    DOI: 10.1016/j.econmod.2010.08.012
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    More about this item

    Keywords

    Household production; Pro-market infrastructures; Generalized balanced growth; Cross-country analysis;
    All these keywords.

    JEL classification:

    • O20 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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