Working Papers

Reliving the '50s: The Big Push, Poverty Traps, and Takeoffs in Economic Development - Working Paper 65

8/16/05
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The international effort to meet the Millennium Development Goals by 2015 has given fresh prominence to the idea of poverty traps, a notion that was widely current in the 1950s. This idea, most actively promoted by economist Jeffrey Sachs, director of Columbia University’s Earth Institute and Special Advisor to UN Secretary-General Kofi Annan, argues that developing countries are caught in a "poverty trap" that requires a "big push" of aid and investment in order to reach a "take-off" to increased per-capita income and higher standards of living. In this paper, William Easterly, Professor of Economics at NYU and Non-Resident Fellow at CGD, tests various elements of this narrative using growth regressions. He contends that the data do not support the view that "poverty traps" of zero growth or "takeoffs" are a widespread occurrence among low-income countries. He argues that the divergence in growth trajectories tends to be associated with the existence of democratic institutions and economic freedom, rather than with disadvantages in initial income. Easterly concludes that more rapid economic growth and poverty reduction will require changes from the bottom up rather than a "big push" from development planners at the top.