Introduction

Abstract

The question how to alleviate poverty in low-income countries has been discussed broadly and with plenty of controversies in the literature on de-velopment economics. Traditional proposals are dominated by two major arguments: First, economic growth is regarded as the most important driver to reduce poverty, and second, an outward-oriented development strategy focusing on international trade and investment flows is claimed to lead to a higher domestic growth path. These ideas have been derived from classical economic theory, suggesting that the accumulation of capital is the central ingredient for increased savings and investment, which in turn results in a higher economic growth rate. An assumed trickle-down process then ensures that also poor social groups within the economy will receive a higher income.