In this paper, we argue that the condition of education and the economy of the low performing sub-Saharan African countries can be characterized as a stagnant steady state -- a "trap". We present a simple heterogeneous-agent model in which high costs of education relative to income and the skill...

In this paper, we evaluate four explanations for economic stagnation that have been proposed in the literature: coordination failures, ineffective mix of occupational choices, insufficient human capital accumulation, and politico-economic considerations. We calibrate models that embody these...

This paper presents a model of an economy in which traders use social capital to reduce transaction costs. A key assumption is that there are two types of social capital: “village” capital relies on personal networks and repeat play to guarantee contracts; “market” capital relies on...

In this paper, we investigate incentives other than altruism that developed countries have in improving technologies specific to developing countries. We propose a simple model of international trade between two regions, in which all individuals have similar preferences over an inferior good and...

In this paper, we reexamine the question "Why doesn't capital flow from rich to poor countries?" posed, most recently, by Lucas (1990). We build a simple contracting framework where costly intermediation together with an adverse selection problem have quantitatively important effects on capital...