Journal of Evolutionary Economics

, Volume 29, Issue 2, pp 611–630 | Cite as

Evolutionary dynamics of poverty traps

  • Edgar J. Sanchez CarreraEmail author
Regular Article


Standard growth theory teaches us that poverty traps are stable-low level balanced growth paths to which economies gravitate due to adverse initial conditions or poor equilibrium selection. In other words, societies fail to take off into sustained growth because they started poor, or because they cannot create institutions that coordinate their investments successfully. This paper explains this pernicious form of coordination failure as an evolutionary game between firms and workers. Rates of return of innovative firms depend on average skilled workers, and rates of return on skilled workers depend on aggregate innovative firms’ investments. So, in poor economies with a large fraction of unskilled workers or non-innovative firms, imitative strategies do not support a take-off into sustained growth. To achieve that take-off, the society should subsidize the cost of education and/or skill premia through a tax system on income until the economy builds a critical mass of high-profile economic agents.


Behavioral macroeconomics Evolutionaty games and imitative behavior Poverty traps Strategic complementarities 

JEL Classification

C72 C79 D83 O12 



We thank the anonymous reviewers for their constructive comments, which helped us to improve the manuscript. Many thanks to Elvio Accinelli, Costas Azariadis, Sam Bowles, Aracely Escandon, Herb Gintis, Lawrence Katz, Sebastian Ille, Adrian Risso, Laura Policardo, and Lionello Punzo for their helpful feedback to improve this research. The usual disclaimer applies.

Compliance with Ethical Standards

Conflict of interest

The Author(s) declare(s) that there is no conflict of interest.


  1. Acemoglu D (1997) Training and innovation in an imperfect labor market. Rev Econ Stud 64:445–64CrossRefGoogle Scholar
  2. Acemoglu D (1998) Why do new technologies complement skills? Directed technical change and wage inequality. Q J Econ 113(4):1055–1089CrossRefGoogle Scholar
  3. Acemoglu D (1999) Changes in unemployment and wage inequality: an alternative theory and some evidence. Am Econ Rev 89(5):1259–1278CrossRefGoogle Scholar
  4. Acemoglu D (2002) Technical change, inequality and the labor market. J Econ Lit 40:7–72CrossRefGoogle Scholar
  5. Acemoglu D (2003) Patterns of skill premia. Rev Econ Stud 70:199–230CrossRefGoogle Scholar
  6. Accinelli E, Sánchez Carrera E (2011) Strategic complementarities between innovative firms and skilled workers: the poverty trap and the policymaker’s intervention. Struct Chang Econ Dyn 22(1):30–40CrossRefGoogle Scholar
  7. Accinelli E, Sánchez Carrera E (2012) The evolutionary game of poverty traps. Manch Sch 80(4):381–400CrossRefGoogle Scholar
  8. Aghion P (2006) On institutions and growth. In: Eicher T S, García-Peñalosa C (eds) Institutions, development, and economics growth. The MIT Press, CambridgeGoogle Scholar
  9. Aghion P, Howitt P (1999) On the macroeconomic consequences of major technological change. In: Helpman E (ed) General purpose technologies and economic growth. MIT Press, CambridgeGoogle Scholar
  10. Apesteguia J, Huck S, Oechssler J (2007) Imitation-theory and experimental evidence. J Econ Theory 136:217–235CrossRefGoogle Scholar
  11. Azariadis C, Starchuski H (2005) Poverty traps. In: Aghion P, Durlauf S (eds) Handbook of economic growth, vol 1 Part A, Elsevier, pp 295–384Google Scholar
  12. Berman E, Bound J, Griliches Z (1994) Changes in the demand for skilled labor within U.S. manufacturing industries: evidence from the annual survey of manufacturing. Q J Econ 109:367–97CrossRefGoogle Scholar
  13. Björnerstedt J, Weibull J (1995) Nash equilibrium and evolution by imitation. In: Arrow K et al (eds) The rational foundations of economic behavior. Macmillan, pp 155–171Google Scholar
  14. Björnerstedt J, Weibull J (1996) Nash equilibrium and evolution by Imitation. In: K. Arrow et al. (eds) The Rational Foundations of Economic Behavior. Macmillan, LondonGoogle Scholar
  15. Funk P, Vogel T (2004) Endogenous skill bias. J Econ Dyn Control 28:2155–93CrossRefGoogle Scholar
  16. Haskel JE, Heden Y (1999) Computers and the demand for skilled labour: industry and establishment-level panel evidence for the UK. Econ J 109:C68–C79CrossRefGoogle Scholar
  17. Hendricks L (2000) Equipment investment and growth in developing countries. J Dev Econ 61:335–364CrossRefGoogle Scholar
  18. Hornstein A, Krusell P, Violante GL (2005) The effects of technical change on labor market inequalities. In: Aghion P, Durlauf S (eds) Handbook of economic growth. ElsevierGoogle Scholar
  19. Greenwood J, Yorukoglu M (1997) 1974. Carnegie-Rochester Conference Series on Public Policy 46:49–95Google Scholar
  20. Kiley MT (1999) The supply of skilled labour and skill-biased technological progress. Econ J 109:708–24CrossRefGoogle Scholar
  21. Kraay A, McKenzie D (2014) Do poverty traps exist? Assessing the evidence. J Econ Perspect 28(3):127–148CrossRefGoogle Scholar
  22. Lucas RE (1988) On the mechanics of economic development. J Monet Econ 22(1):3–42CrossRefGoogle Scholar
  23. Machin S, Van Reenen J (1998) Technology and changes in the skill structure: evidence from seven OECD countries. Q J Econ 113:1215–1244CrossRefGoogle Scholar
  24. Maynard Smith J (1974) The theory of games and the evolution of animal conflict. J Theor Biol 47:209–22CrossRefGoogle Scholar
  25. Maynard Smith J (1982) Evolution and the theory of games. Cambridge University Press, CambridgeCrossRefGoogle Scholar
  26. Maynard Smith J, Price GR (1973) The logic of animal conflict. Nature 246:15–18CrossRefGoogle Scholar
  27. Nelson R, Phelps E (1966) Investment in humans, technological diffusion, and economic growth. Am Econ Rev 61:69–75Google Scholar
  28. Redding S (1996) The low-skill, low-quality trap: strategic complementarities between human capital and R&D. Econ J 106(435):458–70CrossRefGoogle Scholar
  29. Schlag K (1998) Why imitate, and if so, how? A boundedly rational approach to multi-armed dandits. J Econ Theory 78(1):130–156CrossRefGoogle Scholar
  30. Schlag K (1999) Which one should I imitate?. J Math Econ 31:493–522CrossRefGoogle Scholar
  31. Sanchez Carrera E (2012) Imitation and evolutionary stability of poverty traps. J Bioecon 14(1):1–20CrossRefGoogle Scholar
  32. Sanchez Carrera E (2016) Evolutionary games and poverty traps. Cambridge Scholars Publishing, CambridgeGoogle Scholar
  33. Schultz TW (1975) The value of the ability to deal with disequilibria. J Econ Lit 13:827–846Google Scholar
  34. Weibull J (1995) Evolutionary game theory. The MIT Press, CambridgeGoogle Scholar
  35. Zeeman E (1980) Population dynamics from game theory. In: Global theory of dynamical systems, pp 471–496Google Scholar

Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Department of Economics, Society, and PoliticsThe University of Urbino Carlo BoUrbinoItaly

Personalised recommendations