The Evolutionary Game Of Poverty Traps

We study a coordination game, between a leader population and a follower population. Each individual of each population follows an imitative behavior in order to decide between being a high- or low-type economic agent. We show that individual behavior driven by imitation can lead to an economy that is either in a low-level equilibrium-a poverty trap-or a high-level equilibrium. We analyze how possible it is for an economy placed in the basin of attraction of the poverty trap to overcome it through the strategic action (limited on time) of a benevolent central planner. © 2011 The Authors. The Manchester School © 2011 Blackwell Publishing Ltd and The University of Manchester.

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