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Poverty traps, aid, and growth

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Author Info
Kraay, Aart
Raddatz, Claudio

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Abstract

The authors examine the empirical evidence in support of the poverty trap view of underdevelopment. They calibrate simple aggregate growth models in which poverty traps can arise due to either low saving or low technology at low levels of development. They then use these models to assess the empirical relevance of poverty traps and their consequences for policy. The authors find little evidence of the existence of poverty traps based on these two broad mechanisms. When put to the task of explaining the persistence of low income in African countries, the models require either unreasonable values for key parameters, or else generate counterfactual predictions regarding the relations between key variables. These results call into question the view that a large scaling-up of aid to the poorest countries is a necessary condition for sharp and sustained increases in growth.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3631.

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Date of creation: 01 Jun 2005
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Handle: RePEc:wbk:wbrwps:3631

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Keywords: Environmental Economics&Policies; Economic Theory&Research; Achieving Shared Growth; Economic Growth; Poverty Assessment;

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Full references

Cited by:
(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. Francisco Rodríguez, 2008. "An Empirical Test of the Poverty Traps Hypothesis," Publications 4, International Policy Centre for Inclusive Growth. [Downloadable!]
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  2. Fofack, Hippolyte, 2008. "Technology trap and poverty trap in Sub-Saharan Africa," Policy Research Working Paper Series 4582, The World Bank. [Downloadable!]
  3. Lennart Erickson & Carl-Johan Dalgaard, 2007. "Solow Versus Harrod-Domar: Reexamining the Aid Costs of the First Millennium Development Goal," IMF Working Papers 06/284, International Monetary Fund. [Downloadable!]
  4. Naude, Wim, 2007. "Geography and Development in Africa: Overview and Implications for Regional Cooperation," Working Papers UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
  5. Birdsall, Nancy, 2006. "Stormy Days on an Open Field: Asymmetries in the Global Economy," Working Papers RP2006/31, World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
  6. Strulik, Holger & Dalgaard, Carl-Johan, 2007. "Subsistence ? A Bio-economic Foundation of the Malthusian Equilibrium," Proceedings of the German Development Economics Conference, Göttingen 2007 31, Verein für Socialpolitik, Research Committee Development Economics. [Downloadable!]
    Other versions:
  7. 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!]
  8. Strulik, Holger, 2008. "A Note on Economic Growth with Subsistence Consumption," Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Universität Hannover dp-405, Universität Hannover, Wirtschaftswissenschaftliche Fakultät. [Downloadable!]
  9. Benjamin F. Jones & Benjamin A. Olken, 2005. "The Anatomy of Start-Stop Growth," NBER Working Papers 11528, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Strulik, Holger, 2009. "Patience and Prosperity," Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Universität Hannover dp-426, Universität Hannover, Wirtschaftswissenschaftliche Fakultät. [Downloadable!]
  11. Ravallion, Martin, 2009. "Why don't we see poverty convergence ?," Policy Research Working Paper Series 4974, The World Bank. [Downloadable!]
  12. Guillaumont, Patrick & Guillaumont Jeanneney, Sylviane, 2007. "Big Push versus Absorptive Capacity: How to Reconcile the Two Approaches," Working Papers UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
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  13. Danny Cassimon & Bjorn Van Campenhout, 2008. "Multiple Equilibria in the Dynamics of Financial Globalization," WEF Working Papers 0044, ESRC World Economy and Finance Research Programme, Birkbeck, University of London. [Downloadable!]
  14. Marcelo Bentes Diniz & Ricardo Bruno Santos do Nascimento & Márcia Jucá Teixeira Diniz & Cláudio Castelo Branco Puty & Sérgio Luiz de Medeiros Rivero, 2007. "A Amazônia (Legal) Brasileira: Evidências De Uma Condição De Armadilha Da Pobreza?," Anais do XXXV Encontro Nacional de Economia [Proceedings of the 35th Brazilian Economics Meeting] 090, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics]. [Downloadable!]
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