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A simple locally interactive model of ergodic and nonergodic growth

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  • Corradi, Valentina
  • Ianni, Antonella

Abstract

In this paper we propose a locally interactive model which explains both the cross sectional dynamics as well as the possibility of multiple long run equilibria. Firms can choose between two technologies say 1 and 0; the returns from technology 1 are affected by the number of neighboring firms using it; the returns from technology 0 are independent of neighboring firms technological choices. Durlauf (1993) explains nonergodic growth via strong technological complementarities. By modeling in a different way the transmission of the spillover effects, we show that in presence of technological complementarities of intermediate strength we have either two or infinitely many long run equilibria. The basin of attraction of these equilibria depend on the initial conditions. On the other hand when the technological complementarities are either very weak or very strong then we have a unique long run equilibrium. As for the dynamic behavior, we shall explain the formation of large connected areas, clusters. As the cluster size grows at a rate slower than t, such areas seem to be stationary along the dynamics.

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File URL: http://eprints.soton.ac.uk/32963/1/0010.pdf
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Bibliographic Info

Paper provided by Economics Division, School of Social Sciences, University of Southampton in its series Discussion Paper Series In Economics And Econometrics with number 0010.

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Date of creation: 01 Apr 2000
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Handle: RePEc:stn:sotoec:0010

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  1. L. Blume, 2010. "The Statistical Mechanics of Strategic Interaction," Levine's Working Paper Archive 488, David K. Levine.
  2. Azariadis, Costas & Drazen, Allan, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 501-26, May.
  3. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1988. "Industrialization and the Big Push," NBER Working Papers 2708, National Bureau of Economic Research, Inc.
  4. William Brock & Steven N. Durlauf, 2000. "Interactions-Based Models," NBER Technical Working Papers 0258, National Bureau of Economic Research, Inc.
  5. S Durlauf & Danny Quah, 1998. "The New Empirics of Economic Growth," CEP Discussion Papers dp0384, Centre for Economic Performance, LSE.
  6. Lawrence Blume, 1993. "The Statistical Mechanics of Best-Response Strategy Revision," Game Theory and Information 9307001, EconWPA, revised 26 Jan 1994.
  7. Bala, Venkatesh & Sorger, Gerhard, 2001. "A Spatial-Temporal Model of Human Capital Accumulation," Journal of Economic Theory, Elsevier, vol. 96(1-2), pages 153-179, January.
  8. Andjel, Enrique D. & Liggett, Thomas M. & Mountford, Thomas, 1992. "Clustering in one-dimensional threshold voter models," Stochastic Processes and their Applications, Elsevier, vol. 42(1), pages 73-90, August.
  9. Cooper, Russell & John, Andrew, 1988. "Coordinating Coordination Failures in Keynesian Models," The Quarterly Journal of Economics, MIT Press, vol. 103(3), pages 441-63, August.
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