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Reliving the 1950s: the big push, poverty traps, and takeoffs in economic development

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  • William Easterly

Abstract

The classic narrative of economic development—poor countries are caught in poverty traps, out of which they need a Big Push involving increased investment, leading to a takeoff in per capita income—has been very influential in foreign aid debates since the 1950s. This was the original justification for foreign aid. The narrative lost credibility for a while but has made a big comeback in the new millennium. Once again it is invoked as a rationale for large foreign aid programs. This paper applies very simple tests to the various elements of the narrative. Evidence to support the narrative is scarce. Poverty traps in the sense of zero growth for low-income countries are rejected by the data in the whole period 1950–2001 and for most sub-periods. The poorest quintile also does not have significant negative growth of the relative income ratio to the world’s richest country over 1950–2001, nor is relative growth for the lowest quintile significantly different than other quintiles. The claim that “well-governed poor nations” are caught in poverty traps is rejected by simple regressions that control for both initial income and quality of government (instrumenting for the latter). The idea of the takeoff also does not garner much support in the data. Takeoffs are rare in the data, most plausibly limited to the Asian success stories. Even then, the takeoffs are not associated with aid, investment, or education spending as the standard narrative would imply. Copyright Springer Science+Business Media, LLC 2006

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Bibliographic Info

Article provided by Springer in its journal Journal of Economic Growth.

Volume (Year): 11 (2006)
Issue (Month): 4 (December)
Pages: 289-318

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Handle: RePEc:kap:jecgro:v:11:y:2006:i:4:p:289-318

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Web page: http://www.springerlink.com/link.asp?id=102931

Related research

Keywords: Poverty trap; Economic development; Economic growth; Foreign aid;

References

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Citations

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Cited by:
  1. Kraay, Aart & McKenzie, David, 2014. "Do poverty traps exist ?," Policy Research Working Paper Series 6835, The World Bank.
  2. Joshua C. Hall & Russell S. Sobel & George R. Crowley, 2010. "Institutions, Capital, and Growth," Southern Economic Journal, Southern Economic Association, vol. 77(2), pages 385-405, October.
  3. Wamboye, Evelyn, 2012. "Quantity or quality? foreign aid implications on economic growth in least developed countries," MPRA Paper 39518, University Library of Munich, Germany.
  4. Wamboye, Evelyn & Adekola, Abel, 2013. "Foreign Aid, Legal Origin, Economic Growth and Africa’s Least Developed Countries," MPRA Paper 47846, University Library of Munich, Germany.
  5. Kodila-Tedika, Oasis, 2013. "Esclavagisme et colonisation : Quelles conséquences contemporaines en Afrique ? - Résumé critique des travaux de l'économiste Nathan Nunn
    [Slavery and colonization: What contemporary consequenc
    ," MPRA Paper 43732, University Library of Munich, Germany.
  6. Nathan Nunn & Diego Puga, 2009. "Ruggedness: The Blessing of Bad Geography in Africa," NBER Working Papers 14918, National Bureau of Economic Research, Inc.
  7. Francisco Rodríguez, 2008. "An Empirical Test of the Poverty Traps Hypothesis," Wesleyan Economics Working Papers 2008-005, Wesleyan University, Department of Economics.
  8. Patrick A. Imam & Eleonara Granziera & Norbert Funke, 2008. "Terms of Trade Shocks and Economic Recovery," IMF Working Papers 08/36, International Monetary Fund.

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