Rich, Poor and Growth-Miracle Nations: Multiple Equilibria Revisited

Kylymnyuk Dmytro (), Lilia Maliar and Serguei Maliar
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Kylymnyuk Dmytro: University of Toulouse

The B.E. Journal of Macroeconomics, 2007, vol. 7, issue 1, 44

Abstract: This paper presents a two-sector growth model of international trade that can account for the key features of the postwar world development experience. Two sectors represent traditional primitive production and modern sophisticated production. Due to increasing returns in the modern sector, the open-economy version of our model gives rise to three different equilibria: one in which the country produces only primitive goods and converges to a low-income steady state; another in which it produces both primitive and sophisticated goods and converges to the world-average steady state; and a third in which it specializes in the production of sophisticated goods and converges to a balanced growth path. We argue that the development experiences of poor, rich and growth-miracle countries are well described by these three equilibria.

Keywords: international trade; small-open economy; multiple equilibria; poverty trap; growth miracles; coordination problem (search for similar items in EconPapers)
Date: 2007
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Working Paper: RICH, POOR AND GROWTH-MIRACLE NATIONS: MULTIPLE EQUILIBRIA REVISITED (2004)
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DOI: 10.2202/1935-1690.1482

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