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Escaping the poverty trap in a developing rural economy

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  • Nguyen Manh Hung
  • Paul Makdissi

Abstract

In this paper, we examine the economic policies that might allow a developing rural economy to escape from the poverty trap characterized by a subsistence level of per capita consumption in the long run. In our model where labour is combined to land available in fixed quantity to produce a homogeneous good, saving could be made through only having children, the number of which is an endogenous decision. We provide conditions under which the economy runs into a poverty trap, and proceed to analyse the relevant policies in this case. We demonstrate that an escape from this poverty trap is possible through a suitable technology transfer, or an appropriate child-rearing tax, but not with a foreign manufacturing sector, which increases only temporarily the labour income in this rural economy.

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  • Nguyen Manh Hung & Paul Makdissi, 2004. "Escaping the poverty trap in a developing rural economy," Canadian Journal of Economics, Canadian Economics Association, vol. 37(1), pages 123-139, February.
    • Handle: RePEc:cje:issued:v:37:y:2004:i:1:p:123-139
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    Cited by:

    1. Donatella Saccone & Matteo Migheli, 2022. "Free to escape? Economic freedoms, growth and poverty traps," Review of Development Economics, Wiley Blackwell, vol. 26(3), pages 1518-1554, August.
    2. Aurora Teixeira & Pedro Vieira, 2005. "Escaping from poverty through compulsory schooling," Notas Económicas, Faculty of Economics, University of Coimbra, issue 21, pages 6-15, June.
    3. Indra Maipita & Wawan Hermawan & Fitrawaty, 2012. "Reducing Poverty Through Subsidies: Simulation Of Fuel Subsidy Diversion To Non-Food Crops," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 14(4), pages 349-366, April.

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    More about this item

    JEL classification:

    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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