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Evaluating Explanations for Stagnation

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Author Info
Elizabeth M. Caucutt (University of Western Ontario)
Krishna B. Kumar (USC Marshall School of Business)

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Abstract

In this paper, we evaluate four explanations for economic stagnation that have been proposed in the literature: coordination failures, ineffective mix of occupational choices, insufficient human capital accumulation, and politico-economic considerations. We calibrate models that embody these explanations in the context of the stagnant economies of sub-Saharan Africa. The methodology of calibration is ideally suited for this evaluation, given the paucity of high-quality data, the high degree of model nonlinearity, and the need for conducting counterfactual policy experiments. In addition to studying how closely and robustly these models capture the African situation, we examine the quantitative aspects of their policy implications. We find that calibrations that yield multiple equilibria -- one prosperity and the other stagnation -- are not particularly robust. This tempers optimism about the efficacy of one-shot or temporary development policies suggested by models with multiplicity. However, the calibrated models indicate that small policy interventions are sufficient to trigger development in stagnant economies.

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Paper provided by EconWPA in its series Development and Comp Systems with number 0409002.

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Length: 46 pages
Date of creation: 04 Sep 2004
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Handle: RePEc:wpa:wuwpdc:0409002

Note: Type of Document - pdf; pages: 46
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Web page: http://129.3.20.41

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Related research
Keywords: Coordination failure; Occupational choice; Human capital accumulation; Political economy; Economic Development; Calibration.;

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Find related papers by JEL classification:
O - Economic Development, Technological Change, and Growth
P - Economic Systems

References listed on IDEAS
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.:

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  31. repec:att:wimass:199419r is not listed on IDEAS
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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. Christian Ahlin & Neville Jiang, 2005. "Can Micro-Credit Bring Development?," Working Papers 05019, Department of Economics, Vanderbilt University. [Downloadable!]
  2. Kraay, Aart & Raddatz, Claudio, 2005. "Poverty traps, aid, and growth," Policy Research Working Paper Series 3631, The World Bank. [Downloadable!]
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