The impact of simple institutions in experimental economies with poverty traps

C.M. Capra, T. Tanaka, C. Camerer, L. Feiler, V. Sovero, C.N. Noussair

Research output: Contribution to journalArticleScientificpeer-review

Abstract

We introduce an experimental approach to study the effect of institutions on economic growth. In each period, agents produce and trade output in a market, and allocate it to consumption and investment. Productivity is higher if total capital stock is above a threshold. The threshold externality generates two steady states – a suboptimal ‘poverty trap’ and an optimal steady state. In a baseline treatment, the economies converge to the poverty trap. However, the ability to make public announcements or to vote on competing and binding policies, increases output, welfare and capital stock. Combining these two simple institutions guarantees that the economies escape the poverty trap.
Original languageEnglish
Pages (from-to)977-1009
JournalEconomic Journal
Volume119
Issue number539
Publication statusPublished - 2009

Fingerprint

Poverty trap
Capital stock
Announcement
Productivity
Externalities
Economic growth
Vote
Guarantee

Cite this

Capra, C. M., Tanaka, T., Camerer, C., Feiler, L., Sovero, V., & Noussair, C. N. (2009). The impact of simple institutions in experimental economies with poverty traps. Economic Journal, 119(539), 977-1009.
Capra, C.M. ; Tanaka, T. ; Camerer, C. ; Feiler, L. ; Sovero, V. ; Noussair, C.N. / The impact of simple institutions in experimental economies with poverty traps. In: Economic Journal. 2009 ; Vol. 119, No. 539. pp. 977-1009.
@article{494b29f3a8b748a197199b7bf9ae744d,
title = "The impact of simple institutions in experimental economies with poverty traps",
abstract = "We introduce an experimental approach to study the effect of institutions on economic growth. In each period, agents produce and trade output in a market, and allocate it to consumption and investment. Productivity is higher if total capital stock is above a threshold. The threshold externality generates two steady states – a suboptimal ‘poverty trap’ and an optimal steady state. In a baseline treatment, the economies converge to the poverty trap. However, the ability to make public announcements or to vote on competing and binding policies, increases output, welfare and capital stock. Combining these two simple institutions guarantees that the economies escape the poverty trap.",
author = "C.M. Capra and T. Tanaka and C. Camerer and L. Feiler and V. Sovero and C.N. Noussair",
year = "2009",
language = "English",
volume = "119",
pages = "977--1009",
journal = "The Economic Journal",
issn = "0013-0133",
publisher = "Wiley-Blackwell",
number = "539",

}

Capra, CM, Tanaka, T, Camerer, C, Feiler, L, Sovero, V & Noussair, CN 2009, 'The impact of simple institutions in experimental economies with poverty traps' Economic Journal, vol. 119, no. 539, pp. 977-1009.

The impact of simple institutions in experimental economies with poverty traps. / Capra, C.M.; Tanaka, T.; Camerer, C.; Feiler, L.; Sovero, V.; Noussair, C.N.

In: Economic Journal, Vol. 119, No. 539, 2009, p. 977-1009.

Research output: Contribution to journalArticleScientificpeer-review

TY - JOUR

T1 - The impact of simple institutions in experimental economies with poverty traps

AU - Capra, C.M.

AU - Tanaka, T.

AU - Camerer, C.

AU - Feiler, L.

AU - Sovero, V.

AU - Noussair, C.N.

PY - 2009

Y1 - 2009

N2 - We introduce an experimental approach to study the effect of institutions on economic growth. In each period, agents produce and trade output in a market, and allocate it to consumption and investment. Productivity is higher if total capital stock is above a threshold. The threshold externality generates two steady states – a suboptimal ‘poverty trap’ and an optimal steady state. In a baseline treatment, the economies converge to the poverty trap. However, the ability to make public announcements or to vote on competing and binding policies, increases output, welfare and capital stock. Combining these two simple institutions guarantees that the economies escape the poverty trap.

AB - We introduce an experimental approach to study the effect of institutions on economic growth. In each period, agents produce and trade output in a market, and allocate it to consumption and investment. Productivity is higher if total capital stock is above a threshold. The threshold externality generates two steady states – a suboptimal ‘poverty trap’ and an optimal steady state. In a baseline treatment, the economies converge to the poverty trap. However, the ability to make public announcements or to vote on competing and binding policies, increases output, welfare and capital stock. Combining these two simple institutions guarantees that the economies escape the poverty trap.

M3 - Article

VL - 119

SP - 977

EP - 1009

JO - The Economic Journal

JF - The Economic Journal

SN - 0013-0133

IS - 539

ER -

Capra CM, Tanaka T, Camerer C, Feiler L, Sovero V, Noussair CN. The impact of simple institutions in experimental economies with poverty traps. Economic Journal. 2009;119(539):977-1009.