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Caught in a Poverty Trap? Testing for Single vs. Multiple Equilibrium Models of Growth

Author

Listed:
  • Rodríguez Francisco R.

    (Bank of America Merrill Lynch, One Bryant Park, New York, NY 10036, USA)

  • Shelton Cameron A.

    (Robert Day School of Economics and Finance, Claremont McKenna College, 500 E Ninth St, Claremont, CA 91711, USA)

Abstract

We look for permanent effects to per capita GDP from exogenous, temporary shocks. Our shocks are temporary changes to the export revenues of small, open economies. We find no evidence that even the largest of these temporary shocks, in excess of 9.7% of GDP, produce permanent effects to the growth path of per capita GDP. The inability to reject a single-equilibrium world with shocks of this magnitude suggests that multiple-equilibria, if they exist, are too widely separated to be policy-relevant. Current aid initiatives, which are of a similar magnitude, are not likely to deliver transition to a higher growth path.

Suggested Citation

  • Rodríguez Francisco R. & Shelton Cameron A., 2013. "Caught in a Poverty Trap? Testing for Single vs. Multiple Equilibrium Models of Growth," Journal of Globalization and Development, De Gruyter, vol. 3(2), pages 1-25, March.
    • Handle: RePEc:bpj:globdv:v:3:y:2013:i:2:p:1-25:n:6
    DOI: 10.1515/jgd-2012-0033
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    References listed on IDEAS

    as
    1. Azariadis, Costas, 1996. "The Economics of Poverty Traps: Part One: Complete Markets," Journal of Economic Growth, Springer, vol. 1(4), pages 449-496, December.
    2. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
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