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On the Co-Evolution of Innovation and Demand: Some Policy Implications

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  • Pier Paolo Saviotti
  • Andreas Pyka

Abstract

Long term economic development is characterized not only by increasing efficiency of economic activities but also by qualitative change within industries and increasing variety concerning the existence of different industries. Traditional economic growth models do not cope with the complex amalgam of these three trajectories of economic development nor could comprise the interactions among them. Furthermore, economic development is not a process which is spurred by supply-side effects but driven by the co-evolutionary interplay of supply and demand side forces. With our TEVECON model we analyze economic development driven by efficiency and quality improvements together with structural change and the co-evolution between innovation and demand. The first part of the paper introduces to the basic model and some general results. The second part of the paper deals with policy experiments which are undertaken by comparing different numerically analyzed scenarios.

Suggested Citation

  • Pier Paolo Saviotti & Andreas Pyka, 2012. "On the Co-Evolution of Innovation and Demand: Some Policy Implications," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(5), pages 347-388.
  • Handle: RePEc:cai:reofsp:reof_124_0347
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    References listed on IDEAS

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    1. Foley Duncan K., 1994. "A Statistical Equilibrium Theory of Markets," Journal of Economic Theory, Elsevier, vol. 62(2), pages 321-345, April.
    2. Alfarano, Simone & Milakovic, Mishael, 2009. "Network structure and N-dependence in agent-based herding models," Journal of Economic Dynamics and Control, Elsevier, vol. 33(1), pages 78-92, January.
    3. Alan Kirman, 1993. "Ants, Rationality, and Recruitment," The Quarterly Journal of Economics, Oxford University Press, vol. 108(1), pages 137-156.
    4. Sylvain Barde, 2012. "Back to the future: economic rationality and maximum entropy prediction," Studies in Economics 1202, School of Economics, University of Kent.
    5. Schelling, Thomas C, 1969. "Models of Segregation," American Economic Review, American Economic Association, pages 488-493.
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    Citations

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    Cited by:

    1. Saviotti, Pier Paolo & Pyka, Andreas, 2013. "From necessities to imaginary worlds: Structural change, product quality and economic development," Technological Forecasting and Social Change, Elsevier, pages 1499-1512.
    2. Teixeira, Aurora A.C. & Queirós, Anabela S.S., 2016. "Economic growth, human capital and structural change: A dynamic panel data analysis," Research Policy, Elsevier, pages 1636-1648.
    3. Saviotti, Pier Paolo & Pyka, Andreas & Jun, Bogang, 2016. "Education, structural change and economic development," Structural Change and Economic Dynamics, Elsevier, vol. 38(C), pages 55-68.
    4. Jean-Luc Gaffard & Mauro Napoletano, 2012. "Introduction. Improving the Toolbox," Post-Print hal-01053562, HAL.
    5. Anabela Queirós & Aurora A.C. Teixeira, 2014. "Economic growth, human capital and structural change: an empirical analysis," FEP Working Papers 549, Universidade do Porto, Faculdade de Economia do Porto.

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