Poverty Trap in Ethiopia
Paper , Order, or Assignment Requirements
Complementarities (and therefore poverty traps) arise in a variety of situations. In class, we have discussed several, including the relationship between wages, nutrition, and ability to work; communication/network technologies; schooling choices; scarcity; and the big push. Kiminori Matsuyama has a helpful discussion of poverty traps here. (https://faculty.wcas.northwestern.edu/~kmatsu/Poverty%20Traps.pdf)
Describe some setting (other than the ones discussed in class) where there may be a poverty trap that you think is relevant to economic development. These types of issues are equally as important for micro and macro settings, so you should feel free to focus a setting that you care about.
A good paper will do the following:
a) Describe the theory (in words or math) underlying the poverty trap.
b) Pick a specific place and describe the economic environment. What in the data (either
actual data or in “stylized facts”) suggests that the poverty trap actually might exist? What types of regressions/experiments might you want to run (or actually run if you are feeling ambitious)? Be careful to distinguish between features that are consistent with a poverty trap, and those that are consistent only with a poverty trap.
c) Discuss if there a realistic role for policies that could make everyone better off.