Rich Nations, Poor Nations: How Much Can Multiple Equilibria Explain?

57 Pages Posted: 27 Nov 2001

See all articles by Bryan S. Graham

Bryan S. Graham

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER)

Jonathan R.W. Temple

Centre for Economic Policy Research (CEPR)

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Date Written: November 2001

Abstract

The idea that income differences between rich and poor nations arise through multiple equilibria or 'poverty traps' is as intuitive as it is difficult to verify. In this Paper, we explore the empirical relevance of such models. We calibrate a simple two-sector model for 127 countries, and use the results to analyse the international prevalence of poverty traps and their consequences for productivity. We also examine the possible effects of multiplicity on the world distribution of income, and identify events in the data that may correspond to equilibrium switching.

Keywords: Multiple equilibria, poverty traps, world income distribution

JEL Classification: O11

Suggested Citation

Graham, Bryan S. and Temple, Jonathan R.W., Rich Nations, Poor Nations: How Much Can Multiple Equilibria Explain? (November 2001). CEPR Discussion Paper No. 3046. Available at SSRN: https://ssrn.com/abstract=290520

Bryan S. Graham (Contact Author)

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Jonathan R.W. Temple

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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