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The Wealth of Nations: Fundamental Forces Versus Poverty Traps

  • David E. Bloom
  • David Canning
  • Jaypee Sevilla

We test the view the large differences in income levels we see across the world are due to differences in underlying characteristics, i.e. fundamental forces, against the alternative that there are poverty traps. Taking geographical variables as fundamental characteristics, we find that we can reject fundamental forces in favor of a poverty trap model with high and low level equilibria. The high level equilibrium state is found to be the same for all countries while income in the low level equilibrium, and the probability of being in the high level equilibrium, are greater in cool, coastal countries with high, year- round, rainfall.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8714.

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Date of creation: Jan 2002
Date of revision:
Handle: RePEc:nbr:nberwo:8714
Note: EFG
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  1. Quah, Danny, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," CEPR Discussion Papers 1355, C.E.P.R. Discussion Papers.
  2. Alberto Alesina & Enrico Spolaore, 1995. "On the Number and Size of Nations," NBER Working Papers 5050, National Bureau of Economic Research, Inc.
  3. P. Feve & Y. Le Pen, 2000. "On modelling convergence clubs," Applied Economics Letters, Taylor & Francis Journals, vol. 7(5), pages 311-314.
  4. Paapaa, Richard & van Dijk, Herman K., 1998. "Distribution and mobility of wealth of nations," European Economic Review, Elsevier, vol. 42(7), pages 1269-1293, July.
  5. Costas Azariadis, 1996. "The Economics of Poverty Traps Part One: Complete Markets," Working Papers 9606, Centro de Investigacion Economica, ITAM.
  6. Berthelemy, Jean-Claude & Varoudakis, Aristomene, 1996. "Economic Growth, Convergence Clubs, and the Role of Financial Development," Oxford Economic Papers, Oxford University Press, vol. 48(2), pages 300-328, April.
  7. Easterly, William & Levine, Ross, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1203-50, November.
  8. Durlauf, S.M. & Johnson, P.A., 1995. "Multiple Regimes and Cross-Country Growth Behavior," Working papers 9419r, Wisconsin Madison - Social Systems.
  9. John Luke Gallup & Jeffrey D. Sachs & Andrew Mellinger, 1999. "Geography and Economic Development," CID Working Papers 1, Center for International Development at Harvard University.
  10. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
  11. Gallup, J.L. & Sachs, J.D. & Mullinger, A., 1999. "Geography and Economic Development," Papers 1, Chicago - Graduate School of Business.
  12. Bianchi, Marco, 1997. "Testing for Convergence: Evidence from Non-parametric Multimodality Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(4), pages 393-409, July-Aug..
  13. Danny Quah, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," CEP Discussion Papers dp0280, Centre for Economic Performance, LSE.
  14. Bolton, Patrick & Roland, Gerard, 1997. "The Breakup of Nations: A Political Economy Analysis," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1057-90, November.
  15. Sachs, Jeffrey D & Warner, Andrew M, 1997. "Fundamental," American Economic Review, American Economic Association, vol. 87(2), pages 184-88, May.
  16. Quah, Danny, 1997. "Empirics for Growth and Distribution: Stratification, Polarization, and Convergence Clubs," CEPR Discussion Papers 1586, C.E.P.R. Discussion Papers.
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