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The Evolutionary Game of Poverty Traps

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Author Info
Edgar Sanchez Carrera ()

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Abstract

We study an evolutionary game in which the individual behavior of the economic agents can lead the economy either into a low-level or a high-level equilibrium. The model represents two asymmetric populations, “leaders and followers”, where in each round an economic agent of population 1 is paired with a member of population 2. Our evolutionary game is a signaling game in which only the leader has private information. The leader moves first; the follower observes the leader's action, but not the leader's type, before choosing her own action. We found the equilibria both as self-confirming and evolutionarily stable strategies. Furthermore, considering an imitative behavior of the followers, we show that to overcome the poverty trap there exists a threshold value equals to the ratio "education costs-efficiency wages" of the number of high-profile economic agents

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Paper provided by Department of Economics, University of Siena in its series Department of Economics University of Siena with number 555.

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Date of creation: Feb 2009
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Handle: RePEc:usi:wpaper:555

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Related research
Keywords: Evolutionary games; imitation rule; poverty traps; replicator dynamics; signaling games; strategic complementarities;

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Find related papers by JEL classification:
C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
I30 - Health, Education, and Welfare - - Welfare and Poverty - - - General
O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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  1. Schlag, Karl H., 1999. "Which one should I imitate?," Journal of Mathematical Economics, Elsevier, vol. 31(4), pages 493-522, May. [Downloadable!] (restricted)
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  2. Acemoglu, Daron, 1996. "A Microfoundation for Social Increasing Returns in Human Capital Accumulation," The Quarterly Journal of Economics, MIT Press, vol. 111(3), pages 779-804, August. [Downloadable!] (restricted)
  3. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January. [Downloadable!] (restricted)
  4. Schlag, Karl H., 1998. "Why Imitate, and If So, How?, : A Boundedly Rational Approach to Multi-armed Bandits," Journal of Economic Theory, Elsevier, vol. 78(1), pages 130-156, January. [Downloadable!] (restricted)
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  5. repec:att:wimass:1920317 is not listed on IDEAS
  6. Thomas J. Sargent, 2008. "Evolution and Intelligent Design," American Economic Review, American Economic Association, vol. 98(1), pages 5-37, March. [Downloadable!]
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  7. Skiba, A K, 1978. "Optimal Growth with a Convex-Concave Production Function," Econometrica, Econometric Society, vol. 46(3), pages 527-39, May. [Downloadable!] (restricted)
  8. Durlauf, Steven N, 1996. " A Theory of Persistent Income Inequality," Journal of Economic Growth, Springer, vol. 1(1), pages 75-93, March.
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  9. Alos-Ferrer, Carlos & Weidenholzer, Simon, 2006. "Imitation, local interactions, and efficiency," Economics Letters, Elsevier, vol. 93(2), pages 163-168, November. [Downloadable!] (restricted)
  10. Costas Azariadis, 1996. "The Economics of Poverty Traps Part One: Complete Markets," Working Papers 9606, Centro de Investigacion Economica, ITAM.
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  11. Azariadis, Costas & Drazen, Allan, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 501-26, May. [Downloadable!] (restricted)
  12. Azariadis, Costas & Stachurski, John, 2005. "Poverty Traps," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 5 Elsevier. [Downloadable!] (restricted)
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  13. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July. [Downloadable!] (restricted)
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