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The Economics of Poverty Traps Part One: Complete Markets

  • Costas Azariadis

    (University of California, Los Angeles)

This essay lists theoretical reasons why neoclassical models of one-sector growth imply that nations with identical economic structures need not converge to the same steady state or balanced growth path, and outlines the empirical significance and policy implications of conditional non-convergence. We survey poverty traps in both convex and non-convex economies with complete market structures (Part One) and incomplete ones (Part Two). Among the potential causes of traps are subsistence consuption; distorted international trade in intermediate inputs; demographic transitions when fertility is endogenous; technological complementarities in the production of consumption goods, financial intermediation services, manufactures, or human capital; coordination failures among voters; various restrictions on borrowing, indivisibilities in human capital formation or child rearing; and monopolistic competition in product or factor markets.

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Paper provided by Centro de Investigacion Economica, ITAM in its series Working Papers with number 9606.

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Length: 60 pages
Date of creation: Feb 1996
Date of revision:
Handle: RePEc:cie:wpaper:9606
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