Satiation and Underdevelopment

Peter Funk ()

DELTA Working Papers from DELTA (Ecole normale supérieure)

Abstract: In this article we show, how absolute poverty and per capital growth can be sustained simultaneously in a fully integrated world economy. Poverty persists due to an endogenously sustained bias in the direction of technological change. We show in an example framework, that if free trade is opened up too early between an initially less developed and a more developed country, then part of the population of the initially less advanced country is caught in a poverty trap. If, on the other hand, individuals are restricted to trade within their own economy for a sufficiently long time, no poverty trap arises. The essential assumption is that once a person has satisfied his basic needs, he prefers high-quality commodities to low-quality commodities.

Date: 1997
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Journal Article: Satiation and underdevelopment (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:del:abcdef:97-24

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