Template-Type: ReDIF-Paper 1.0 Author-Name: Dyotona Dasgupta Author-Name-First: Dyotona Author-Name-Last: Dasgupta Author-Email: dasgupta.dyotona@gmail.com Author-Workplace-Name: O.P. Jindal Global University Author-Name: Anuradha Saha Author-Name-First: Anuradha Author-Name-Last: Saha Author-Email: anuradha.saha@ashoka.edu.in Author-Workplace-Name: Ashoka University Title: Towards a Theory of Behavioral Poverty Traps Abstract: In a dynamic setting, we build a theoretical model to capture the macroeconomic implications of parental biases on poverty traps and income inequality. Less privileged parents have biased perceptions about ‘self-efficacy’. Perceived self-efficacy is shaped by socio-economic backgrounds. We find that biases increase the extent of poverty trap. Without any biases, there exists a poverty trap only when the parental warm glow is low. With biases, there emerges a poverty trap even for moderate warm glow. For high parental warm glow, there may exist a poverty trap. Income inequality in presence of biased parents is always (weakly) higher. length: 11 Creation-Date: 20220418 Revision-Date: Publication-Status: File-URL: https://dp.ashoka.edu.in/ash/wpaper/paper78_0.pdf File-Format: Application/pdf Number: 78 Handle: RePEc:ash:wpaper:78