Is poverty an obstacle for economic growth? A dynamic panel data approach

Abstract: Despite global modern economic growth, most countries remained stuck in persistent poverty. Jeffrey Sachs suggested considering poverty itself as the explanation for persistent levels of poverty and low growth. The theory is based on the existence of poverty traps, which keep families and countries caught in poverty. This research contributes to the poverty trap literature by evaluating the effect that poverty has on growth by means of a dynamic panel data approach. In so doing, we find evidence of a negative effect of poverty on growth. Moreover, this text aims to identify the channels of transmission of such effect by means of a theoretical and empirical analysis.