Department of Economics
Chinese University of Hong Kong
Shatin, NT, Hong Kong
NBER Working Papers and Publications
|August 2013||Barriers to Health and the Poverty Trap|
with Ping Wang: w19263
Why have some poor countries been able to take off while others are still stuck in the poverty trap? To address this old question, we observe that (i) with similar or higher levels of educational attainment, trapped countries tend to have much poorer health conditions compared to the initially poor countries that later took off, and (ii) improving health conditions in poor countries usually involves large-scale investment where such resources can be easily misallocated. We construct a dynamic general equilibrium model with endogenous health and knowledge accumulation, allowing health-related institutional barriers to affect individual incentives and equilibrium outcomes. We then calibrate the model to fit (i) the U.S. economy (as a benchmark), (ii) a representative trapped economy based on...