Model Description
The dynamic model for poverty traps contains parameters as government policies and technologies, and variables such as income, expenditures, assets holdings and anthropometric status. This dynamic model for poverty traps offers a new perspective by showing the existence of multiple stable equilibria, which implies that there's one unstable dynamic equilibria. At this unstable equilibria, any little shock in the system will cause a switch to state equilibrium. Different to the standard economic growth model, the dynamic model offers a new perspective where multiple equilibria exists, changing the shape of the curve and offering stable dynamic equilibria at high and low levels of welfare. In the middle of both equilibria there is an unstable equilibria, a critical threshold, that may be seen as a saddle (to get to a higher welfare level) or a sink (to be stuck in lower levels of welfare). The importance of this model relies in the effects of effective policies that may help to originate that little shock that will contribute to solve the big challenge of reducing world's poverty.
Multiple equilibria
Shows multiple equilibria
$w_{t+1} = a+\frac{w_{t}^3}{b^3+w_{t}^3}$ |
| The dynamic model for the poverty trap consists in two stable points and one threshold, unstable equilibria. "a" represents government policies and is consider a parameter in the model. "b" is technology and it will be determined by each country. "w" represents a series of variables that determine the level of poverty of each country. In this term, we are including income, expenditures, assets holdings and anthropometric status. |
# simple model of a poverty trap. par a=0.075,b=0.5 w(t+1) = a + w**3/(b**3 + w**3) init w=0.38 @ ylo=0,yhi=1 done
Ramirez Hernandez K, Arizona State University.
. 2006. Fractal Poverty Traps. World Development. 34(1)
