Order ID 6463784949 Type Essay Writer Level Masters Style APA/MLA/Harvard/Chicago Sources/References 6 Number of Pages 5-10 Pages Description/Paper Instructions Multiple equilibria arise in a variety of situations. The idea is to explain why people behave differently even if the fundamental characteristics are similar. A classic example is driving: in some countries people drive on the left, in others they drive on the right. There’s no fundamental reason to explain why, but it’s also clear why each equilibrium is stable.
In development, an iconic example of multiple equilibria are poverty traps: Kiminori Matsuyama has a helpful discussion of poverty traps here, and Mullaianathan and Shafir describe their behavioral poverty trap here. We have discussed others in class, for instance the Magrebi and Genoese solutions to the fundamental problem of exchange.
For your final essay, I would like you to write about multiple equilibria. In particular, I would like you to discuss some feature of development that you think is caused by multiple equilibria (and not by fundamental differences in exogenous characteristics). 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. I would rather that you didn’t cover topics we discussed in class, which have been (or will be) health, education, and corruption. That said, I am flexible: if you have an idea you are excited about, you should talk to me.
A good paper will do the following:
a) Describe the theory (in words or math) explaining the multiple equilibria. In particular, I am interested in understanding why the equilibria are stable: if there is a “good” one and a “bad” one, why don’t people in the latter just switch to the former? (You do not need to pick a setting where the equilibria are clearly ranked, but you should still discuss stability).
b) Pick a specific place and describe the economic environment. What in the data suggests that the poverty trap actually might exist? What type of analysis would you need to undertake? You do not need to analyze your own data (although of course it is encouraged), but you should at least find relevant empirical research. Be careful to distinguish between features that are consistent with multiple equilibria (e.g. hungry people have less energy), and those that are consistent only with multiple equilibria (how much less energy do they have?). You may discover that your theory does not have strong empirical support. This is totally fine! As long as the theory is remotely plausible, it is not a problem if you end up concluding that it doesn’t explain the world. I would rather that your paper did a careful job analyzing the data than trying to pretend that your theory has empirical support when it doesn’t.
c) You should be able to do simulations on the computer: take your formal model of the specific environment you are studying, plugging the relevant values from the data, and then seeing if there is in fact scope for a poverty trap.
d) Discuss if there a realistic role for policies that could make everyone better off. The papers are graded holistically, so you don’t need to give each section equal weight: if you are really excited about theory or simulations, you should focus on that (although you should probably talk with me first if you want to make the whole paper about one of the parts). In the past, students have deviated further from the prompt (for instance replicating the data analysis of a published paper), please talk with me if you are interested. I will not grade you on the elegance of your writing, but your papers should at least be copy- edited (spelling and grammar checked).
Your essays should be around 2500 words, or roughly 10 double spaced pages of text. Please submit a (stapled & typed) hardcopy of this assignment in class, in my office, or in my mailbox on the 6th floor of 19 W4th Street. You must also submit a soft copy of your paper on the Classes page. Everyone who wants one can get an extension until May 15th at noon (you don’t have to ask). No further extensions will be given.GET THIS PROJECT NOW BY CLICKING ON THIS LINK TO PLACE THE ORDER
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