|Original language||English (US)|
|Title of host publication||The New Palgrave Dictionary of Economics|
|Editors||Steven Durlauf, Lawrence E Blume|
|State||Published - 2008|
A poverty trap is a self-perpetuating condition, in which an economy suffers from persistent underdevelopment, vicious circle of poverty, created by circular causation due to the presence of some external economies and/or strategic complementarities. We discuss the concept in a dynamic setting, and review some models of poverty traps in the literature. The policy prescriptions of such models should be treated with caution, since each model identifies one cause; but as many causes are likely to coexist, attempts to pull an economy out of one trap may push it into another.