ECONOMIC GROWTH
455
steady state, but
_
k
2
is an unstable steady state. If the economy starts out with
a value of
k
such that
_
k
1
k
_
k
2
, it has an innate tendency for the value of
k
to reduce to
_
k
1
.
If, somehow, the capital stock per capita gets to
k
_
k
2
,
then, the economy
will have a tendency to grow further. Hence, for any
k
_
k
2
,
the economy is
caught in a
POVERTY
TRAP
. Any attempt to raise the per capita output and capital
stock has the propensity to return the economy to the low-level steady state,
_
k
1
.
There are three possible ways of overcoming the barrier to ...
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