Poverty traps in natural resource based economy: case of Iran

Raghfar, Hosein; Kurd Bache, Hamid; Paktinat, Marzie

Document Type : Research Paper

Authors

¹ Assistant professor of economics, University of Azahra

² Assistant professor of economics, University of economic sciences

³ M.S of economics, University of Azahra

Abstract

Poverty traps as vicious circles preserve people‘s poverty and undermine the poor effort to overcome their own misery. This paper presents an empirical test for a subclass of poverty traps hypotheses. This test is based on the production function to generate multiple equilibrium, while must be present in the region between the equilibrium. Therefore, increasing returns should be strongest when the economy is transiting between steady state than when it is at or near in one of those steady states. We implement this idea by estimating the degree of increasing returns during growth accelerations and growth transitions for a panel of developing and developed economies using World Bank Industrial data. Results of this study show that economies of scale occur where there is collapse in growth. Nevertheless, there are no criteria to distinguish transitory ranges from non-transitory ones. Although, this assumption confirmed economies of scale in industry result in poverty traps.

Keywords

References

Acemoglu, Daron (2009), Introduction to Modern Economic Growth. Princeton University Press. Princeton.

Acemoglu, Daron and Simon Johnson (2006), Unbundling Institutions, Journal of Political Economy.

Aghion, Philipe, and Peter Howitt (2008), The Economics of Growth, Cambridge, Mass : MIT Press.

Azariadis, C. & Stachurski, J (2004), Poverty Traps, in Aghion, P. & Durlauf, S., (eds), Handbook of Economic Growth.North- Holland, Amsterdam.

Bloom, D., Canning, D. & Sevilla, J. (2003), Geography and Poverty Traps, Journal of Economic Growth, 2003, Vol. 8.

Coelli, T.J., D.S. Prasada Rao and G.E. Battese (2005), An Introduction to Efficiency and Productivity Analysis, Kluwer Academic Publishers, Boston.

Cooper, R, & John, A (1988), Coordinating Coordination Failures in Keynesian Model s, Quarterly Journal of Economics CII(3).

Easterly, W (2006), Reliving the 1950s: the Big Push, Poverty Traps, and Takeoffs in Economic Development, Journal of Economic Growth Vol. 11(4).

Ellis and H.C. Wallich, editors, Economic Development in Latin America. New York: Macmillan.

Hausmann, R., Rodríguez, F. & Wagner, R. (2008), Growth Collapses, in Reinhart, C., Velasco, A. & Vegh, C. (eds). Money, Crises, and Transition: Essays in Honor of Guillermo Calvo. Cambridge, MIT Press.

Kraay, A. & Raddatz, C (2005), Poverty traps, aid, and growth. Journal of Development Economics Vol.82(2).

Maddala, G.S. and Wu, Shaowen (1999), A Comparative Study of Unit Root Tests With Panel Data and A New Simple Test, Oxford Bulletin of Economics and Statistics 61.

Myrdal.G (1957), Economic Theory and Under-Developed Regions. London: Duckworth.

Nelson.R (1956), A Theory of the Low Level Equilibrium Trap. American Economic Review.

Nerlove, M (1963), Returns to Scale in Electricity Supply, in Christ, C. F., (ed). Measurement in Economics: Studies in Honor of Yehuda Grunfeld.Stanford, Stanford University Press.

Nurkse.R (1953), Problems of Capital-Formation in Underdeveloped Countries, 1962 edition, New York: Oxford Univeristy Press.

Paul, G (1992), Technology Choice, Financial Markets and Economic Development, EER.

Penn World Tables 6.3 data set,

http://pwt.econ.upenn.edu/php_site/pwt63/pwt63_form.php

Prebisch, R (1950) The economic development of Latin America and its Principal Problem, United Nations Economic Commission for Latin America,

Quah, D (1996), Twin Peaks: Growth and Convergence in Models of Distribution Dynamics, Economic Journal Vol.106 (437), pp. 1045-55.

Rodríguez,F (2008), An Empirical Test Of The Poverty Traps Hypothesis, in Department of Economics, Wesleyan University, number4.

Rosenstein.P-Rodan (1943), The Problem of Industrialization of Eastern and South-Eastern Europe, Economic Journal, Vol. 53.

Rosenstein.P-Rodan (1961), Notes on the Theory of the Big Push, in H.S.

Rostow.W.W (1960), The Stages of Economic Growth, Cambridge, UK:Cambridge University Press.

Sachs, J., McArthur J. W., Schmidt-Traub, G., Krukm, M. Bahadur, C, Faye, M., & McCord, G. (2004) Ending Africa's Poverty Trap, in Brookings Papers on Economic Activity.

Economics Research

Poverty traps in natural resource based economy: case of Iran

References

References

Acemoglu, Daron (2009), Introduction to Modern Economic Growth. Princeton University Press. Princeton.

Acemoglu, Daron and Simon Johnson (2006), Unbundling Institutions, Journal of Political Economy.

Aghion, Philipe, and Peter Howitt (2008), The Economics of Growth, Cambridge, Mass : MIT Press.

Azariadis, C. & Stachurski, J (2004), Poverty Traps, in Aghion, P. & Durlauf, S., (eds), Handbook of Economic Growth.North- Holland, Amsterdam.

Bloom, D., Canning, D. & Sevilla, J. (2003), Geography and Poverty Traps, Journal of Economic Growth, 2003, Vol. 8.

Coelli, T.J., D.S. Prasada Rao and G.E. Battese (2005), An Introduction to Efficiency and Productivity Analysis, Kluwer Academic Publishers, Boston.

Cooper, R, & John, A (1988), Coordinating Coordination Failures in Keynesian Model s, Quarterly Journal of Economics CII(3).

Easterly, W (2006), Reliving the 1950s: the Big Push, Poverty Traps, and Takeoffs in Economic Development, Journal of Economic Growth Vol. 11(4).

Ellis and H.C. Wallich, editors, Economic Development in Latin America. New York: Macmillan.

Hausmann, R., Rodríguez, F. & Wagner, R. (2008), Growth Collapses, in Reinhart, C., Velasco, A. & Vegh, C. (eds). Money, Crises, and Transition: Essays in Honor of Guillermo Calvo. Cambridge, MIT Press.

Kraay, A. & Raddatz, C (2005), Poverty traps, aid, and growth. Journal of Development Economics Vol.82(2).

Maddala, G.S. and Wu, Shaowen (1999), A Comparative Study of Unit Root Tests With Panel Data and A New Simple Test, Oxford Bulletin of Economics and Statistics 61.

Myrdal.G (1957), Economic Theory and Under-Developed Regions. London: Duckworth.

Nelson.R (1956), A Theory of the Low Level Equilibrium Trap. American Economic Review.

Nerlove, M (1963), Returns to Scale in Electricity Supply, in Christ, C. F., (ed). Measurement in Economics: Studies in Honor of Yehuda Grunfeld.Stanford, Stanford University Press.

Nurkse.R (1953), Problems of Capital-Formation in Underdeveloped Countries, 1962 edition, New York: Oxford Univeristy Press.

Paul, G (1992), Technology Choice, Financial Markets and Economic Development, EER.

Penn World Tables 6.3 data set,

http://pwt.econ.upenn.edu/php_site/pwt63/pwt63_form.php

Prebisch, R (1950) The economic development of Latin America and its Principal Problem, United Nations Economic Commission for Latin America,

Quah, D (1996), Twin Peaks: Growth and Convergence in Models of Distribution Dynamics, Economic Journal Vol.106 (437), pp. 1045-55.

Rodríguez,F (2008), An Empirical Test Of The Poverty Traps Hypothesis, in Department of Economics, Wesleyan University, number4.

Rosenstein.P-Rodan (1943), The Problem of Industrialization of Eastern and South-Eastern Europe, Economic Journal, Vol. 53.

Rosenstein.P-Rodan (1961), Notes on the Theory of the Big Push, in H.S.

Rostow.W.W (1960), The Stages of Economic Growth, Cambridge, UK:Cambridge University Press.

Sachs, J., McArthur J. W., Schmidt-Traub, G., Krukm, M. Bahadur, C, Faye, M., & McCord, G. (2004) Ending Africa's Poverty Trap, in Brookings Papers on Economic Activity.

Sachs, Jeffrey D (2006) The End of Poverty. Penguin Books.

Singer.H.W (1949), Economic Progress in Underdeveloped Countries, Social Research.

Solow.R.M (1956), A Contribution to the Theory of Economic Growth Quarterly Journal of Economics. Vol. 70 (1).

World Development Indicators 2007, International Bank for Reconstruction and Development/ The World Bank.

Young. A (1928), Increasing Returns and Economic Progress, Economic Journal, Vol. 38.

Volume 12, Issue 45 - Serial Number 2
July 2012
Pages 143-171

Poverty traps in natural resource based economy: case of Iran

References

References

Acemoglu, Daron (2009), Introduction to Modern Economic Growth. Princeton University Press. Princeton.

Acemoglu, Daron and Simon Johnson (2006), Unbundling Institutions, Journal of Political Economy.

Aghion, Philipe, and Peter Howitt (2008), The Economics of Growth, Cambridge, Mass : MIT Press.

Azariadis, C. & Stachurski, J (2004), Poverty Traps, in Aghion, P. & Durlauf, S., (eds), Handbook of Economic Growth.North- Holland, Amsterdam.

Bloom, D., Canning, D. & Sevilla, J. (2003), Geography and Poverty Traps, Journal of Economic Growth, 2003, Vol. 8.

Coelli, T.J., D.S. Prasada Rao and G.E. Battese (2005), An Introduction to Efficiency and Productivity Analysis, Kluwer Academic Publishers, Boston.

Cooper, R, & John, A (1988), Coordinating Coordination Failures in Keynesian Model s, Quarterly Journal of Economics CII(3).

Easterly, W (2006), Reliving the 1950s: the Big Push, Poverty Traps, and Takeoffs in Economic Development, Journal of Economic Growth Vol. 11(4).

Ellis and H.C. Wallich, editors, Economic Development in Latin America. New York: Macmillan.

Hausmann, R., Rodríguez, F. & Wagner, R. (2008), Growth Collapses, in Reinhart, C., Velasco, A. & Vegh, C. (eds). Money, Crises, and Transition: Essays in Honor of Guillermo Calvo. Cambridge, MIT Press.

Kraay, A. & Raddatz, C (2005), Poverty traps, aid, and growth. Journal of Development Economics Vol.82(2).

Maddala, G.S. and Wu, Shaowen (1999), A Comparative Study of Unit Root Tests With Panel Data and A New Simple Test, Oxford Bulletin of Economics and Statistics 61.

Myrdal.G (1957), Economic Theory and Under-Developed Regions. London: Duckworth.

Nelson.R (1956), A Theory of the Low Level Equilibrium Trap. American Economic Review.

Nerlove, M (1963), Returns to Scale in Electricity Supply, in Christ, C. F., (ed). Measurement in Economics: Studies in Honor of Yehuda Grunfeld.Stanford, Stanford University Press.

Nurkse.R (1953), Problems of Capital-Formation in Underdeveloped Countries, 1962 edition, New York: Oxford Univeristy Press.

Paul, G (1992), Technology Choice, Financial Markets and Economic Development, EER.

Penn World Tables 6.3 data set,

http://pwt.econ.upenn.edu/php_site/pwt63/pwt63_form.php

Prebisch, R (1950) The economic development of Latin America and its Principal Problem, United Nations Economic Commission for Latin America,

Quah, D (1996), Twin Peaks: Growth and Convergence in Models of Distribution Dynamics, Economic Journal Vol.106 (437), pp. 1045-55.

Rodríguez,F (2008), An Empirical Test Of The Poverty Traps Hypothesis, in Department of Economics, Wesleyan University, number4.

Rosenstein.P-Rodan (1943), The Problem of Industrialization of Eastern and South-Eastern Europe, Economic Journal, Vol. 53.

Rosenstein.P-Rodan (1961), Notes on the Theory of the Big Push, in H.S.

Rostow.W.W (1960), The Stages of Economic Growth, Cambridge, UK:Cambridge University Press.

Sachs, J., McArthur J. W., Schmidt-Traub, G., Krukm, M. Bahadur, C, Faye, M., & McCord, G. (2004) Ending Africa's Poverty Trap, in Brookings Papers on Economic Activity.

Sachs, Jeffrey D (2006) The End of Poverty. Penguin Books.

Singer.H.W (1949), Economic Progress in Underdeveloped Countries, Social Research.

Solow.R.M (1956), A Contribution to the Theory of Economic Growth Quarterly Journal of Economics. Vol. 70 (1).

World Development Indicators 2007, International Bank for Reconstruction and Development/ The World Bank.

Young. A (1928), Increasing Returns and Economic Progress, Economic Journal, Vol. 38.

Volume 12, Issue 45 - Serial Number 2July 2012Pages 143-171

Volume 12, Issue 45 - Serial Number 2
July 2012
Pages 143-171