Abstract
A poverty trap is a self-perpetuating condition whereby an economy, caught in a vicious circle, suffers from persistent underdevelopment. Although it is often modelled as a low-level equilibrium in a static model of coordination failures, we discuss the concept in a dynamic setting. This is because, in a static setting, we would be unable to distinguish poverty traps from (possibly temporary) bad market outcomes, such as recessions and financial crises, that are also often modelled as low-level equilibriums in a static model of coordination failures.
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Matsuyama, K. (2010). poverty traps. In: Durlauf, S.N., Blume, L.E. (eds) Economic Growth. The New Palgrave Economics Collection. Palgrave Macmillan, London. https://doi.org/10.1057/9780230280823_27
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DOI: https://doi.org/10.1057/9780230280823_27
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