Economic growth, poverty traps and cycles: productive capacitiesversusinefficiencies

Germana Giombini, Francesca Grassetti and Edgar Sánchez Carrera ()

Journal of Economic Studies, 2022, vol. 50, issue 7, 1375-1398

Abstract: Purpose - The authors analyse a growth model to explain how economic fluctuations are primarily driven by productive capacities (i.e. capacity utilization driven by innovations and know-how) and productive inefficiencies. Design/methodology/approach - This study’s methodology consists of the combination of the economic growth model, à la Solow–Swan, with a sigmoidal production function (in capital), which may explain growth, poverty traps or fluctuations depending on the relative levels of inefficiencies, productive capacities or lack of know-how. Findings - The authors show that economies may experience economic growth, poverty traps and/or fluctuations (i.e. cycles). Economic growth is reached when an economy experiences both a low level of inefficiencies and a high level of productive capacities while an economy falls into a poverty trap when there is a high level of inefficiencies in production. Instead, the economy gets in cycles when there is a large level of the lack of know-how and low levels of productive capacity. Originality/value - The authors conclude that more capital per capita (greater savings and investment) and greater productive capacity (with less lack of know-how) are the economic policy keys for an economy being on the path of sustained economic growth.

Keywords: Economic growth modelling; Long waves; Low-level equilibrium and traps; Endogenous fluctuations; C61; D24; E32; O40 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jespps:jes-06-2022-0365

DOI: 10.1108/JES-06-2022-0365

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