Escaping the poverty trap in a developing rural economy

Nguyen Manh Hung and Paul Makdissi ()

Canadian Journal of Economics, 2004, vol. 37, issue 1, 123-139

Abstract: In this paper, we examine the economic policies that might allow a developing rural economy to escape from the poverty trap characterized by a subsistence level of per capita consumption in the long run. In our model where labour is combined to land available in fixed quantity to produce a homogeneous good, saving could be made through only having children, the number of which is an endogenous decision. We provide conditions under which the economy runs into a poverty trap, and proceed to analyse the relevant policies in this case. We demonstrate that an escape from this poverty trap is possible through a suitable technology transfer, or an appropriate child-rearing tax, but not with a foreign manufacturing sector, which increases only temporarily the labour income in this rural economy.

JEL-codes: J11 O11 O40 (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (3)

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