Poverty and sustainable development around the world during transition periods

This paper addresses the question of whether countries can escape from poverty in a sustainable manner. For this purpose, we introduce an endogenous growth model that incorporates human, physical, and natural capital, as well as subsistence consumption. We provide a closed-form solution of the model to exploit the entire transitional phase of countries with unequal initial endowments of human capital and natural resources. We calibrate this model for 108 countries using data from the World Bank on countries’ physical capital and natural resource endowments. Using a battery of established consumption-based sustainability tests, we assess sustainability during the transition towards the economies’ steady-state. We find that most countries are characterized by sustainable development. For those countries not qualifying for sustainable development, we are able to quantify by how much initial capital endowments fall short of minimum requirements implied by sustainability tests.