Rich Nations, Poor Nations: how much can multiple equilibria explain?
|Speaker:||Jonathan Temple, University of Bristol|
|Date:||Friday 13 February 2004|
|Location:||Room 106 Streatam Court|
(with Bryan S. Graham)
This paper asks whether the income gap between rich and poor nations can be explained by multiple equilibria. We explore the quantitative implications of a simple two sector general equilibrium model that gives rise to multiplicity, and calibrate the model for a large number of countries. Under the assumptions of the model, around a quarter of the world's economies are found to be in a low output equilibrium. The output gains associated with an equilibrium switch are sizeable, but well short of the vast income disparity observed in the data.