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Why are Some Countries so Poor?: Another Look at the Evidence and a Message of Hope

Listed author(s):
  • Daniel Cohen
  • Marcelo Soto

The paper attempts to explain why single factor explanations of the poverty of nations are usually found to be unsatisfactory. Middle- and low-income countries excluding sub-Saharan Africa, for instance, have an income per head which stands at about one third of the rich countries’ income per head. Yet each of the three items of the Solow model, namely human capital, physical capital (appropriated weighted) and total factor productivity, are each equal to about 70 per cent of the corresponding levels of rich countries. But 70 per cent to the power of three is 35 per cent! Multiplying small or relatively benign handicaps can yield dramatic effects on a country’s income. The paper then moves on to explain each of the three items. It argues that the Lucas paradox on why capital is scarce can readily be solved, once market prices rather than PPP prices are used to assess the return to capital mobility, and on the same ground it argues that PPP calculations bias downwards the TFP of ... Ce Document technique montre en quoi les explications unidimensionnelles de la pauvreté des nations ne sont généralement pas recevables. Dans les pays à faible et moyen revenus (excepté l’Afrique subsaharienne), par exemple, le revenu par habitant représente environ le tiers de celui des pays riches. Certes, chacun des trois termes du modèle de Solow — capital humain, capital physique (convenablement pondéré) et productivité totale des facteurs — est égal à 70 pour cent environ du niveau correspondant dans les pays riches. Mais, 70 pour cent à la puissance trois font 35 pour cent ! La multiplication de handicaps légers ou relativement bénins peut avoir des conséquences spectaculaires sur la mesure du revenu d’un pays. Les trois termes du modèle de Solow sont ensuite analysés. Le paradoxe de Lucas sur la rareté du capital peut être facilement résolu, dès lors que l’on utilise les prix du marché et non les prix en parité de pouvoir d'achat (PPA) pour estimer le rendement de la ...

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Paper provided by OECD Publishing in its series OECD Development Centre Working Papers with number 197.

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Date of creation: 01 Oct 2002
Handle: RePEc:oec:devaaa:197-en
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