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30 novembre 2021
- ISIDORE Id: 10670/1.92cb81...
- halshs: halshs-03456281
info:eu-repo/semantics/OpenAccess
Mots-clés
Economic dynamics economic growth foreign aid development loan poverty trap O - Economic Development, Innovation, Technological Change, and Growth/O.O1 - Economic Development O - Economic Development, Innovation, Technological Change, and Growth/O.O4 - Economic Growth and Aggregate Productivity -fin]Sujets proches
Economic growth Growth, Economic Development, EconomicCiter ce document
Cuong Le Van et al., « Development loans, poverty trap, and economic dynamics », HAL SHS (Sciences de l’Homme et de la Société), ID : 10670/1.92cb81...
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Résumé
This paper investigates the nexus between foreign aid (in the form of loans), poverty trap, and economic development in a recipient country by using a Solow model with two new ingredients: a development loan and a fixed cost in the production process. The presence of this fixed cost generates a poverty trap. Development loans may help the country to escape from the poverty trap and converge to a stable steady-state in the long run, but only if (i) the country's characteristics, such as saving rate, initial capital, governance quality, and in particular productivity, are good enough, (ii) the fixed cost is relatively low, and (iii) loans rule is generous enough. We also show that there is room for endogenous cycles in our model, unlike the standard Solow model.
