The Wealth of Nations: Fundamental Forces Versus Poverty Traps
David Canning () and
No 8714, NBER Working Papers from National Bureau of Economic Research, Inc
We test the view the large differences in income levels we see across the world are due to differences in underlying characteristics, i.e. fundamental forces, against the alternative that there are poverty traps. Taking geographical variables as fundamental characteristics, we find that we can reject fundamental forces in favor of a poverty trap model with high and low level equilibria. The high level equilibrium state is found to be the same for all countries while income in the low level equilibrium, and the probability of being in the high level equilibrium, are greater in cool, coastal countries with high, year- round, rainfall.
JEL-codes: O1 (search for similar items in EconPapers)
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