Zachary Kessler


Postdoctoral Research Associate


Curriculum vitae



Policy Modeling, Public Policy Programme


Alan Turing Institute



An Agentization of the O-Ring Theory of Development: Issues with Endogenous Skill Matching


Journal article


Zachary B. Kessler

Cite

Cite

APA
Kessler, Z. B. An Agentization of the O-Ring Theory of Development: Issues with Endogenous Skill Matching.

Chicago/Turabian
Kessler, Zachary B. “An Agentization of the O-Ring Theory of Development: Issues with Endogenous Skill Matching” (n.d.).

MLA
Kessler, Zachary B. An Agentization of the O-Ring Theory of Development: Issues with Endogenous Skill Matching.


Abstract

Kremer’s O-Ring Theory of Development (1993) represents an important effort to explain a collection of stylized facts from the economic development literature, most critically the large skill disparities between countries. This paper tests the theory by utilizing an agent- based model to add endogenous choice to workers’ behavior and examines the robustness of its results, determining if a collection of agents can sort themselves into the predicted equilibrium under a variety of circumstances. The agent-based approach reveals that in a world where countries possess a heterogenous number of tasks in their respective production functions, the skill matching in Kremer’s model cannot be reached. Instead, workers sort into a Nash equilibrium rather than the efficient outcome. Further, this result is shown to be robust to changes in the production function and requires additional intervention to recover the efficient outcome.


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