This research tests the hypothesis that international cross-country differences in economic growth are best accounted for through multiple regime growth models, whereas initial underdeveloped conditions lead to parameter heterogeneity in sub-groups of countries’ production functions, permitting for different economies to obey unique linear growth paths, and allowing for the development of poverty traps in the growth process. The theoretical framework employed stems from the neoclassical Solow model, further augmented to account for the accumulation of human capital, and further altered by capital and technological threshold properties that have the ability to induce productivity shifts; leading to the appearance of multiple regime growth paths. Differing from past research, this study utilizes a more robust indicator of human capital, shown to increase the explanatory power of the model, and also includes three control variables, whose initial conditions are shown to be strong indicators of long-term income levels. The model is estimated for two samples based off the mechanical splitting of the total sample (133), by initial per capita GDP and initial literacy rates. Results indicate a strong indication of parameter heterogeneity between sub-samples, therefore validating the hypothesis of multiple regime growth paths arising in economic growth that inherently have the ability to induce poverty traps.
Fitch, Logan, "Poverty Traps in Economic Development: Heterogeneous Production in a Cross-Section of Countries" (2014). Senior Independent Study Theses. Paper 6091.
Bachelor of Arts
Senior Independent Study Thesis
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