Reliving the 1950s: The Big Push, Poverty Traps, and Takeoffs in Economic Development

The classic narrative of economic development--poor countries are caught in poverty traps, out of which they need a Big Push involving increased investment, leading to a takeoff in per capita income--has been very influential in foreign aid debates since the 1950s. This was the original justificatio...

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Bibliographic Details
Published in:Journal of economic growth (Boston, Mass.) Mass.), 2006-12, Vol.11 (4), p.289-318
Main Author: Easterly, William
Format: Article
Language:English
Subjects:
Countries
Developing countries
Development theory
Economic development
Economic growth
Economic summit conferences
Economics
Economists
Education
Financial investments
Foreign aid
Growth rates
Growth theory
History of economic thought
Human capital
LDCs
Low income areas
Low income groups
Narratives
Per capita
Per capita growth
Population growth
Poverty
Prime ministers
Takeoff
World Bank
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Summary:The classic narrative of economic development--poor countries are caught in poverty traps, out of which they need a Big Push involving increased investment, leading to a takeoff in per capita income--has been very influential in foreign aid debates since the 1950s. This was the original justification for foreign aid. The narrative lost credibility for a while but has made a big comeback in the new millennium. Once again it is invoked as a rationale for large foreign aid programs. This paper applies very simple tests to the various elements of the narrative. Evidence to support the narrative is scarce. Poverty traps in the sense of zero growth for low-income countries are rejected by the data in the whole period 1950-2001 and for most sub-periods. The poorest quintile also does not have significant negative growth of the relative income ratio to the world's liehest country over 1950-2001, nor is relative growth for the lowest quintile significantly different than other quintiles. Hie claim that "wellgoverned poor nations" are caught in poverty traps is rejected by simple regressions that control for both initial income and quality of government (instrumenting for the latter). The idea of the takeoff also does not garner much support in the data. Takeoffs are rare in the data, most plausibly limited to the Asian success stories. Even then, the takeoffs are not associated with aid, investment, or education spending as the Standard narrative would imply.
ISSN:1381-4338
1573-7020
DOI:10.1007/s10887-006-9006-7