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Rich Nations, Poor Nations: How Much Can Multiple Equilibria Explain?

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Author Info
Bryan Graham
Jonathan Temple

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Abstract

This paper asks whether the income gap between rich and poor nations can be explained by multiple equilibria. We explore the quantitative implications of a simple two-sector general equilibrium model that gives rise to multiplicity, and calibrate the model for 127 countries. Under the assumptions of the model, around a quarter of the world’s economies are found to be in a low output equilibrium. We also find that, since the output gains associated with an equilibrium switch are sizeable, the model can explain between 15 and 25% of the variation in the logarithm of GDP per worker across countries. Copyright Springer Science + Business Media, Inc. 2006

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File URL: http://hdl.handle.net/10.1007/s10887-006-7404-5
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Publisher Info
Article provided by Springer in its journal Journal of Economic Growth.

Volume (Year): 11 (2006)
Issue (Month): 1 (03)
Pages: 5-41
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Handle: RePEc:kap:jecgro:v:11:y:2006:i:1:p:5-41

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Related research
Keywords: Poverty traps; Multiple equilibria; TFP differences; Calibration; C00; O14; O41; O47;

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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. repec:att:wimass:1920516 is not listed on IDEAS
  2. Francesco Caselli, 2005. "Accounting for Cross-Country Income Differences," CEP Discussion Papers dp0667, Centre for Economic Performance, LSE. [Downloadable!]
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  3. M. Scarlato & M. Cenci, 2004. "Innovazione tecnologica e offerta di skills:una simulazione," Computational Economics 0401003, EconWPA. [Downloadable!]
  4. Dietz Vollrath, 2008. "The Dual Economy in Long-run Development," Working Papers 2008-03, Department of Economics, University of Houston. [Downloadable!]
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  5. Florian Englmaier & Markus Reisinger, 2006. "Information, Coordination, and the Industrialization of Countries," Discussion Papers 87, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
    Other versions:
  6. Costas Aariadis & John Stachurski, 2004. "Poverty Traps," Department of Economics - Working Papers Series 913, The University of Melbourne. [Downloadable!]
    Other versions:
    • Azariadis, Costas & Stachurski, John, 2005. "Poverty Traps," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 5 Elsevier. [Downloadable!] (restricted)
  7. Kimberly Ann Elliott & Debayani Kar & J. David Richardson, 2002. "Assessing Globalization's Critics: "Talkers Are No Good Doers???"," Peterson Institute Working Paper Series WP02-5, Peterson Institute for International Economics. [Downloadable!]
  8. Jonathan Temple, 2002. "The Costs of Dualism," Bristol Economics Discussion Papers 02/532, Department of Economics, University of Bristol, UK. [Downloadable!]
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  9. Kraay, Aart & Raddatz, Claudio, 2005. "Poverty traps, aid, and growth," Policy Research Working Paper Series 3631, The World Bank. [Downloadable!]
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  10. Alan Martina, 2007. "A Class of Poverty Traps: A Theory and Empirical Tests," ANUCBE School of Economics Working Papers 2007-482, Australian National University, College of Business and Economics, School of Economics. [Downloadable!]
  11. Johnson, Paul, 2003. "A Continuous State Space Approach to “Convergence by Parts”," Vassar College Department of Economics Working Paper Series 54, Vassar College Department of Economics. [Downloadable!]
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  12. Strulik, Holger, 2008. "Degrees of Development - How Geographic Latitude Sets the Pace of Industrialization and Demographic Change," Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Universität Hannover dp-384, Universität Hannover, Wirtschaftswissenschaftliche Fakultät. [Downloadable!]
  13. Areendam Chanda & Carl-Johan Dalgaard, . "Dual Economies and International Total Factor Productivity Differences," Departmental Working Papers 2005-11, Department of Economics, Louisiana State University. [Downloadable!]
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  14. Leopoldo Yanes, . "Endogenous Technological Capability,Trade Policy and Coordination Failure: A Reconsideration of Economic Take-Off(s)," MRG Discussion Paper Series 1306, School of Economics, University of Queensland, Australia. [Downloadable!]
  15. Lilia Maliar & Dmytro Kylymnyuk & Serguei Maliar, 2005. "A Model Of Unbalanced Sectorial Growth With Application To Transition Economies," Working Papers. Serie AD 2005-26, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
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  16. Haaparanta, Pertti & Puhakka, Mikko, 2004. "Endogenous time preference, investment and development traps," BOFIT Discussion Papers 4/2004, Bank of Finland, Institute for Economies in Transition. [Downloadable!]
  17. Jonathan Temple, 2006. "Aggregate Production Functions and Growth Economics," International Review of Applied Economics, Taylor and Francis Journals, vol. 20(3), pages 301-317, July. [Downloadable!] (restricted)
  18. Steven N. Durlauf & Andros Kourtellos & Chih Ming Tan, 2005. "Empirics of Growth and Development," Discussion Papers Series, Department of Economics, Tufts University 0520, Department of Economics, Tufts University. [Downloadable!]
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