The Savings Trap and Economic Take-Off
AbstractWe develop a model of economic development in which culture and technology interact to devermine savings, investment, and growth. Investment is assumed to involve intermediation or other costs that may, in any period, result in either of two equilibria for the savings rate. At the good equilibrium, aggregate savings, the savings rate, and growth are all higher than at the bad equilibrium. Whether the country falls into this savings trap depends on each individual's belief about the savings behavior of others in the economy. Goverment policies that coordinate savings and facilitate investment can influence whether the country escapes the trap. Copyright 2002, Oxford University Press.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 92/91.
Date of creation: 01 Nov 1992
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