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Satiation and Underdevelopment

  • Funk, P.

In this article we show, how absolute poverty and per capital growth can be sustained simultaneously in a fully integrated world economy. Poverty persists due to an endogenously sustained bias in the direction of technological change. We show in an example framework, that if free trade is opened up too early between an initially less developed and a more developed country, then part of the population of the initially less advanced country is caught in a poverty trap. If, on the other hand, individuals are restricted to trade within their own economy for a sufficiently long time, no poverty trap arises. The essential assumption is that once a person has satisfied his basic needs, he prefers high-quality commodities to low-quality commodities.

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Paper provided by DELTA (Ecole normale supérieure) in its series DELTA Working Papers with number 97-24.

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Date of creation: 1997
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Handle: RePEc:del:abcdef:97-24
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  1. Novshek, William & Sonnenschein, Hugo, 1978. "Cournot and Walras equilibrium," Journal of Economic Theory, Elsevier, vol. 19(2), pages 223-266, December.
  2. Ciccone, Antonio & Matsuyama, Kiminori, 1996. "Start-up costs and pecuniary externalities as barriers to economic development," Journal of Development Economics, Elsevier, vol. 49(1), pages 33-59, April.
  3. Kevin M. Murphy & Andrei Shleifer & Robert Vishny, 1988. "Income Distribution, Market Size, and Industrialization," NBER Working Papers 2709, National Bureau of Economic Research, Inc.
  4. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1988. "Industrialization and the Big Push," NBER Working Papers 2708, National Bureau of Economic Research, Inc.
  5. Brian Copeland & Ashok Kotwal, 1997. "Quality-biased technical progress and North-South trade," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 6(1), pages 1-14.
  6. Funk,Peter, 1993. "The direction of technological change," Discussion Paper Serie A 393, University of Bonn, Germany.
  7. Ljungqvist, Lars, 1993. "Economic underdevelopment : The case of a missing market for human capital," Journal of Development Economics, Elsevier, vol. 40(2), pages 219-239, April.
  8. Flam, Harry & Helpman, Elhanan, 1987. "Vertical Product Differentiation and North-South Trade," American Economic Review, American Economic Association, vol. 77(5), pages 810-22, December.
  9. Nancy L. Stokey, 1990. "Human Capital, Product Quality, And Growth," NBER Working Papers 3413, National Bureau of Economic Research, Inc.
  10. Markusen, James R, 1986. "Explaining the Volume of Trade: An Eclectic Approach," American Economic Review, American Economic Association, vol. 76(5), pages 1002-11, December.
  11. Barro, R. & Mankiw, G., 1992. "Capital Mobility in Neoclassical Models of Growth," Harvard Institute of Economic Research Working Papers 1615, Harvard - Institute of Economic Research.
  12. Rodriguez-Clare, Andres, 1996. "The division of labor and economic development," Journal of Development Economics, Elsevier, vol. 49(1), pages 3-32, April.
  13. Kiminori Matsuyama, 1990. "Agricultural Productivity, Comparative Advantage, and Economic Growth," Discussion Papers 934, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  14. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May.
  15. F Zilibotti, 1993. "A Rostovian Model of Endogenous Growth and Underdevelopment Traps," CEP Discussion Papers dp0166, Centre for Economic Performance, LSE.
  16. BARHAM, Vicky & BOADWAY, Robin & MARCHAND, Maurice & PESTIEAU, Pierre, 1992. "Education and the poverty trap," CORE Discussion Papers 1992010, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  17. Birdsall, Nancy, 1988. "Economic approaches to population growth," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 12, pages 477-542 Elsevier.
  18. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc.
  19. Stokey, Nancy L, 1991. "The Volume and Composition of Trade between Rich and Poor Countries," Review of Economic Studies, Wiley Blackwell, vol. 58(1), pages 63-80, January.
  20. Funk Peter, 1995. "Bertrand and Walras Equilibria in Large Economies," Journal of Economic Theory, Elsevier, vol. 67(2), pages 436-466, December.
  21. Young, Alwyn, 1991. "Learning by Doing and the Dynamic Effects of International Trade," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 369-405, May.
  22. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  23. Eswaran, Mukesh & Kotwal, Ashok, 1993. "A theory of real wage growth in LDCs," Journal of Development Economics, Elsevier, vol. 42(2), pages 243-269, December.
  24. Kiminori Matsuyama, 1990. "Increasing Returns, Industrialization and Indeterminacy of Equilibrium," Discussion Papers 878, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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