Reliving the '50s: The Big Push, Poverty Traps, and Takeoffs in Economic Development

37 Pages Posted: 31 Mar 2008

See all articles by William Easterly

William Easterly

New York University - Department of Economics

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Date Written: August 16, 2005

Abstract

The classic narrative of economic development - poor countries are caught in poverty traps, out of which they need a Big Push involving increased aid and investment, leading to a takeoff in per capita income - has been very influential in development economics since the 1950s. This was the original justification for foreign aid. The narrative lost credibility for a while but has made a big comeback in the new millennium. Once again it is invoked as a rationale for large foreign aid programs. This paper applies very simple tests to the various elements of the narrative. Evidence to support the narrative is scarce. Poverty traps in the sense of zero growth for low income countries are rejected by the data in most time periods. There is evidence of divergence between rich and poor nations in the long run, but this does not imply zero growth for the poor countries. Moreover, this divergence is more associated with institutions rather than the disadvantages of initial income. The idea of the takeoff does not garner much support in the data. Takeoffs are rare in the data, most plausibly limited to the Asian success stories. Even then, the takeoffs are not associated with aid and investment as the standard narrative would imply.

Keywords: economic development, foreign aid, poverty traps

Suggested Citation

Easterly, William, Reliving the '50s: The Big Push, Poverty Traps, and Takeoffs in Economic Development (August 16, 2005). Available at SSRN: https://ssrn.com/abstract=1114158 or http://dx.doi.org/10.2139/ssrn.1114158

William Easterly (Contact Author)

New York University - Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States

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