Theory and Empirics
Edited by Neri Salvadori, Pasquale Commendatore and Massimo Tamberi
Chapter 10: Dualism and the Big Push
Giovanni Valensisi 10.1. INTRODUCTION The concept of the poverty trap has been used fruitfully since the very dawn of development economics, and can implicitly be traced back even to Adam Smith’s ‘Early draft of part of the Wealth of Nations’.1 Beginning with the seminal paper of Rosenstein Rodan (1943), the idea that underdevelopment could constitute a state of equilibrium thrived with Nurkse’s vicious circle of poverty (1953) and Nelson’s low-level equilibrium trap (1956). Several mechanisms, essentially concerning increasing returns coupled with pecuniary externalities or demographic traps, were from time to time held responsible for creating a multiplicity of equilibria, and possibly preventing the spontaneous development of certain economies.2 Despite the deep interest enjoyed by the so-called ‘high development theory’ in the 1950s, its predominantly discursive argumentation together with the difficulty reconciling increasing returns with competitive market structures3 contributed to its decline in favour of the more analytically rigorous paradigm described by Solow (1956) and Swan (1956). Notwithstanding many important contributions on the role of increasing returns and learning by doing, during the 1960s the mainstream approach to growth became that of the neoclassical convex economy converging to a stable and unique steady state. Additionally, attention shifted from the ‘developmental perspective’ – emphasizing the role of ‘sectoral balances’, as well as the dualistic nature of developing countries’ economies – to an aggregate growth perspective – focusing more on reproducible factors accumulation, and on the determinants of the steady state. It is worth noting here that the choice of an aggregate model rejects by definition...
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