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On Poverty Traps and Equilibria in Growth Models

Author

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  • Olivier de La Grandville

    () (Department of Management Science and Engineering Stanford University)

Abstract

We show that, contrary to a widely spread error, when the savings and the population growth rates are constant, an unstable equilibrium cannot exist in a neoclassical model, because it would imply an increasing average productivity of capital and therefore a negative marginal productivity of labor. As a consequence, a poverty trap, a dire reality, cannot be explained by such an unstable equilibrium, nor cannot it be eliminated by a capital "big-push". We finally give necessary conditions for an economy to escape a poverty trap

Suggested Citation

  • Olivier de La Grandville, 2013. "On Poverty Traps and Equilibria in Growth Models," Journal of Reviews on Global Economics, Lifescience Global, vol. 2, pages 25-30.
  • Handle: RePEc:lif:jrgelg:v:2:y:2013:p:25-30
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    Keywords

    Unstable equilibria; growth models;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O42 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Monetary Growth Models

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