Working Paper: NBER ID: w8714
Authors: David E. Bloom; David Canning; Jaypee Sevilla
Abstract: We test the view the large differences in income levels we see across the world are due to differences in underlying characteristics, i.e. fundamental forces, against the alternative that there are poverty traps. Taking geographical variables as fundamental characteristics, we find that we can reject fundamental forces in favor of a poverty trap model with high and low level equilibria. The high level equilibrium state is found to be the same for all countries while income in the low level equilibrium, and the probability of being in the high level equilibrium, are greater in cool, coastal countries with high, year- round, rainfall.
Keywords: No keywords provided
JEL Codes: O1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Geographical characteristics (R12) | Income levels (D31) |
| Latitude (Y91) | Income levels (D31) |
| Rainfall patterns (Q54) | Probability of high level equilibrium (C62) |
| Geographical characteristics (R12) | Probability of high level equilibrium (C62) |
| Income in low level equilibrium rises with latitude (E25) | Income levels (D31) |