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The savings trap and economic take-off

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  • Carlos M. Asilis

Abstract

We develop a model of economic development in which culture and technology interact to devermine savings, investment, and growth. Investment is assumed to involve intermediation or other costs that may, in any period, result in either of two equilibria for the savings rate. At the good equilibrium, aggregate savings, the savings rate, and growth are all higher than at the bad equilibrium. Whether the country falls into this savings trap depends on each individual's belief about the savings behavior of others in the economy. Goverment policies that coordinate savings and facilitate investment can influence whether the country escapes the trap. Copyright 2002, Oxford University Press.

Suggested Citation

  • Carlos M. Asilis, 2002. "The savings trap and economic take-off," Oxford Economic Papers, Oxford University Press, vol. 54(1), pages 20-43, January.
    • Handle: RePEc:oup:oxecpp:v:54:y:2002:i:1:p:20-43
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    Cited by:

    1. Arellano, Cristina & Bulír, Ales & Lane, Timothy & Lipschitz, Leslie, 2009. "The dynamic implications of foreign aid and its variability," Journal of Development Economics, Elsevier, vol. 88(1), pages 87-102, January.
    2. Rey de Marulanda, Nohra & Guzmán, Julio, 2003. "Inequidad, desarrollo humano y política social: Importancia de las "Condiciones Iniciales"," IDB Publications (Working Papers) 1211, Inter-American Development Bank.
    3. Nohra Rey de Marulanda & Julio Guzmán, 2003. "Inequidad, desarrollo humano y política social: Importancia de las "Condiciones Iniciales"," IDB Publications (Working Papers) 10598, Inter-American Development Bank.
    4. Prof. Dr. Robert Holzmann, 1994. "Funded and Private Pensions for Eastern European Countries in Transition?," Public Economics 9405004, University Library of Munich, Germany.

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