The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Poverty Traps

  • Kiminori Matsuyama
Reference work entry


A poverty trap is a self-perpetuating condition, in which an economy suffers from persistent underdevelopment, vicious circle of poverty, created by circular causation due to the presence of some external economies and/or strategic complementarities. We discuss the concept in a dynamic setting, and review some models of poverty traps in the literature. The policy prescriptions of such models should be treated with caution, since each model identifies one cause; but as many causes are likely to coexist, attempts to pull an economy out of one trap may push it into another.


Poverty traps Stochastic shocks Human capital division of labour Market size Distortions 

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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Kiminori Matsuyama
    • 1
  1. 1.