Dissimilarities in Economic Evolution
By Kalle Moene
Nordic Journal of Political Economy, 2012, Volume 37, Article 4.
To explain why some countries are rich and others poor, I provide a brief overview of A Study in the Theory of Economic Evolution that Trygve Haavelmo published in 1954, before I elaborate on some features inspired by it. I incorporate grabbing activities into a dynamic development model, emphasizing how small differences in initial resources and institutions may create dissimilarities and big gaps between potentially similar countries, how poverty can arise in the midst of potential affluence, how abundance (of natural resources) and scarcity (of entrepreneurial talents) can be wasteful and harmful to economic growth—in particular when institutions are bad.