Wariness and Poverty Traps

ArXiv ID: 2510.14418 “View on arXiv”

Authors: Hai Ha Pham, Ngoc-Sang Pham

Abstract

We investigate the effects of wariness (defined as individuals’ concern for their minimum utility over time) on poverty traps and equilibrium multiplicity in an overlapping generations (OLG) model. We explore conditions under which (i) wariness amplifies or mitigates the likelihood of poverty traps in the economy and (ii) it gives rise to multiple intertemporal equilibria. Furthermore, we conduct comparative statics to characterize these effects and to examine how the interplay between wariness, productivity, and factor substitutability influences the dynamics of the economy.

Keywords: Overlapping generations (OLG) model, Wariness, Poverty traps, Equilibrium multiplicity, Factor substitutability, Macro Economics

Complexity vs Empirical Score

  • Math Complexity: 8.5/10
  • Empirical Rigor: 1.5/10
  • Quadrant: Lab Rats
  • Why: The paper employs advanced mathematical techniques including overlapping generations models, dynamical systems, and comparative statics with CES production functions, but lacks any empirical data, backtests, or implementation details, relying solely on theoretical analysis and numerical simulations.
  flowchart TD
    A["Research Goal"] --> B["Methodology"]
    B --> C["Inputs & Parameters"]
    C --> D["Computational Analysis"]
    D --> E["Key Findings"]

    A["Research Goal<br/>'Wariness & Poverty Traps'<br/>'Do concerns for minimum utility amplify<br/>or mitigate poverty traps?'"]

    B["Methodology<br/>'Overlapping Generations Model'<br/>'- Wariness Preference Parameter<br/>'- Production Function'<br/>'- Equilibrium Conditions'"]

    C["Inputs & Parameters<br/>'- Wariness Intensity (δ)<br/>'- Factor Substitutability (σ)<br/>'- Productivity (A)<br/>'- Time Horizon (T)'"]

    D["Computational Analysis<br/>'- Steady State Solver<br/>'- Phase Diagram Construction<br/>'- Comparative Statics<br/>'- Multiplicity Analysis'"]

    E["Key Findings<br/>'1. Wariness acts as a poverty trap<br/>amplifier OR mitigator'<br/>'2. Multiplicity of equilibria<br/>'3. Critical interaction between<br/>wariness & substitutability'<br/>'4. Threshold-dependent dynamics'"]