Published and unpublished papers by Wei Xiao

Bounded Rationality and the Ineffectiveness of Big Push Policies

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With Junyi Xu.

If a poverty trap exists, can a big-push policy help the economy escape it? This paper applies Sargent (1993)’s bounded rationality approach to study the post-policy transition of an economy from a poverty trap to an equilibrium with a higher income. Poverty traps are robust and big-push policies fail to work. This paper contributes to the renewed discussion on the effectiveness of massive aid policies to developing countries from a theoretical perspective.

Download the paper here.


Written by wxiao

March 12, 2017 at 8:02 pm

Posted in Working paper

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