The LDCs don't invest in capital goods, thereby reducing output potential, increasing poverty, and making future costs of capital investment even higher. This tendency has been referred to as the

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The term "circle of poverty" refers to a self-perpetuating condition where low incomes lead to low levels of savings and investment, which in turn leads to low levels of productivity and thus low incomes again. This cycle makes it difficult for economies, particularly in less developed countries (LDCs), to break out of poverty and invest in capital goods, thereby reducing their output potential and increasing future costs of capital investment.

The LDCs Don't Invest in Capital Goods, Thereby Reducing Output