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

Bryan Graham and Jonathan Temple

Journal of Economic Growth, 2006, vol. 11, issue 1, 5-41

Abstract: This paper asks whether the income gap between rich and poor nations can be explained by multiple equilibria. We explore the quantitative implications of a simple two-sector general equilibrium model that gives rise to multiplicity, and calibrate the model for 127 countries. Under the assumptions of the model, around a quarter of the world’s economies are found to be in a low output equilibrium. We also find that, since the output gains associated with an equilibrium switch are sizeable, the model can explain between 15 and 25% of the variation in the logarithm of GDP per worker across countries. Copyright Springer Science + Business Media, Inc. 2006

Keywords: Poverty traps; Multiple equilibria; TFP differences; Calibration; C00; O14; O41; O47 (search for similar items in EconPapers)
Date: 2006
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Related works:
Working Paper: Rich nations, poor nations: how much can multiple equilibria explain? (2004)
Working Paper: Rich Nations, Poor Nations: How much can multiple equilibria explain? (2002)
Working Paper: Rich Nations, Poor Nations: How Much Can Multiple Equilibria Explain? (2001)
Working Paper: Rich Nations, Poor Nations: How Much can Multiple Equilibria Explain? (2001)
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DOI: 10.1007/s10887-006-7404-5

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