On Poverty Traps and Equilibria in Growth Models

Olivier de La Grandville ()
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Olivier de La Grandville: Department of Management Science and Engineering Stanford University

Journal of Reviews on Global Economics, 2013, vol. 2, 25-30

Abstract: We show that, contrary to a widely spread error, when the savings and the population growth rates are constant, an unstable equilibrium cannot exist in a neoclassical model, because it would imply an increasing average productivity of capital and therefore a negative marginal productivity of labor. As a consequence, a poverty trap, a dire reality, cannot be explained by such an unstable equilibrium, nor cannot it be eliminated by a capital "big-push". We finally give necessary conditions for an economy to escape a poverty trap

Keywords: Unstable equilibria; growth models (search for similar items in EconPapers)
JEL-codes: O11 O41 O42 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:lif:jrgelg:v:2:y:2013:p:25-30

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