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The Wealth of Nations: Fundamental Forces Versus Poverty Traps

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  • David E. Bloom
  • David Canning
  • Jaypee Sevilla

Abstract

We test the view the large differences in income levels we see across the world are due to differences in underlying characteristics, i.e. fundamental forces, against the alternative that there are poverty traps. Taking geographical variables as fundamental characteristics, we find that we can reject fundamental forces in favor of a poverty trap model with high and low level equilibria. The high level equilibrium state is found to be the same for all countries while income in the low level equilibrium, and the probability of being in the high level equilibrium, are greater in cool, coastal countries with high, year- round, rainfall.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8714.

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Date of creation: Jan 2002
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Handle: RePEc:nbr:nberwo:8714

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  1. Costas Azariadis, 1996. "The Economics of Poverty Traps Part One: Complete Markets," Working Papers, Centro de Investigacion Economica, ITAM 9606, Centro de Investigacion Economica, ITAM.
  2. Alesina, Alberto & Spolaore, Enrico, 1997. "On the Number and Size of Nations," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 112(4), pages 1027-56, November.
  3. Le Pen, Yannick & Fève, Patrick, 2000. "On modelling convergence clubs," Economics Papers from University Paris Dauphine 123456789/6861, Paris Dauphine University.
  4. Bolton, Patrick & Roland, Gerard, 1997. "The Breakup of Nations: A Political Economy Analysis," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 112(4), pages 1057-90, November.
  5. Easterly, William & Levine, Ross, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 112(4), pages 1203-50, November.
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  7. Quah, Danny T, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 106(437), pages 1045-55, July.
  8. Quah, Danny, 1997. "Empirics for Growth and Distribution: Stratification, Polarization, and Convergence Clubs," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1586, C.E.P.R. Discussion Papers.
  9. Paapaa, Richard & van Dijk, Herman K., 1998. "Distribution and mobility of wealth of nations," European Economic Review, Elsevier, Elsevier, vol. 42(7), pages 1269-1293, July.
  10. Sachs, Jeffrey D & Warner, Andrew M, 1997. "Fundamental," American Economic Review, American Economic Association, American Economic Association, vol. 87(2), pages 184-88, May.
  11. Danny Quah, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," CEP Discussion Papers dp0280, Centre for Economic Performance, LSE.
  12. Bianchi, Marco, 1997. "Testing for Convergence: Evidence from Non-parametric Multimodality Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 12(4), pages 393-409, July-Aug..
  13. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 114(1), pages 83-116, February.
  14. Gallup, J.L. & Sachs, J.D. & Mullinger, A., 1999. "Geography and Economic Development," Papers, Chicago - Graduate School of Business 1, Chicago - Graduate School of Business.
  15. John Luke Gallup & Jeffrey D. Sachs & Andrew Mellinger, 1999. "Geography and Economic Development," CID Working Papers, Center for International Development at Harvard University 1, Center for International Development at Harvard University.
  16. Berthelemy, Jean-Claude & Varoudakis, Aristomene, 1996. "Economic Growth, Convergence Clubs, and the Role of Financial Development," Oxford Economic Papers, Oxford University Press, vol. 48(2), pages 300-328, April.
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Cited by:
  1. Bryan S. Graham & Jonathan R. W. Temple, 2004. "Rich nations, poor nations: how much can multiple equilibria explain?," The Institute for International Integration Studies Discussion Paper Series, IIIS iiisdp017, IIIS.
  2. Richard Grabowski, 2003. "Promoting industrialization: the role of the traditional sector and the state in East Asia," Journal of International Development, John Wiley & Sons, Ltd., vol. 15(5), pages 587-605.

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