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

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  • Graham, Bryan S
  • Temple, Jonathan

Abstract

The idea that income differences between rich and poor nations arise through multiple equilibria or ‘poverty traps’ is as intuitive as it is difficult to verify. In this Paper, we explore the empirical relevance of such models. We calibrate a simple two-sector model for 127 countries, and use the results to analyse the international prevalence of poverty traps and their consequences for productivity. We also examine the possible effects of multiplicity on the world distribution of income, and identify events in the data that may correspond to equilibrium switching.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3046.

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Date of creation: Nov 2001
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Handle: RePEc:cpr:ceprdp:3046

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Keywords: multiple equilibria; poverty traps; world income distribution;

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