Growth Traps

In this chapter, Professor Larraín talks about poverty traps, growth traps, middle income traps and their causes. Poverty traps are restrictions that make economic growth slower for poor countries, such as the lack of infrastructure, illnesses, low investments in human and physical capital, etc, and which prevent countries from developing further stages of income. The middle income trap happens to countries that cannot move on to the next stage of development, mostly found in East Asia, and are the result of inequality, difficulties raising productivity, or populism. Another trap is the natural resource curse of resource rich countries. Environmental degradation is the final trap, because as economic growth occurs, scarce resources are consumed and endanger the environment for the future. Larraín shows the relationship between environmental degradation and GDP per capita.

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