Poverty trap, boom and bust periods and growth. A nonlinear model for non-developed and developing countries

Francesca Grassetti, Cristiana Mammana () and Elisabetta Michetti ()
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Cristiana Mammana: University of Macerata
Elisabetta Michetti: University of Macerata

Decisions in Economics and Finance, 2018, vol. 41, issue 2, No 3, 145-162

Abstract: Abstract This work investigates the qualitative and quantitative dynamics of a Solow–Swan growth model with differential savings as proposed by Böhm and Kaas (J Econ Dyn Control 24:965–980, 2000) assuming the shifted Cobb–Douglas (SCD) production function (see Capasso et al. in Nonlinear Anal. 11:3858–3876, 2010) which makes it possible to consider the long-run dynamics of non-developed and developing countries as well as that of developed economies. The resulting model is described by a nonlinear discontinuous map generating both a poverty trap and complex dynamics. Furthermore, multistability phenomena may emerge: besides the “vicious circle of poverty”, long-run behaviours may include boom and bust periods. Complex basins can emerge, hence, economic policies trying to raise the capital per capita may fail and economies may be captured by the poverty trap.

Keywords: Solow model; Poverty trap; Growth dynamics; Multistability; Discontinuous map (search for similar items in EconPapers)
JEL-codes: C61 C62 E2 O1 O4 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s10203-018-0211-6

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