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Exploitation, exploration and innovation in a model of endogenous growth with locally interacting agents

  • Fagiolo, Giorgio
  • Dosi, Giovanni

The paper presents a model of endogenous growth in which firms are modeled as boundedly-rational, locally interacting, agents. Firms produce a homogeneous good employing technologies located in an open-ended technological space and are allowed to either imitate existing, similar practices or to locally explore the technological space to find new, more productive techniques. We first identify sufficient conditions for the emergence of empirically plausible GNP time-series characterized by self-sustained growth. Then, we study the trade-off between individual rationality and collective outcomes by providing an example in which more rational agents systematically perform worse than less rational ones.

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Article provided by Elsevier in its journal Structural Change and Economic Dynamics.

Volume (Year): 14 (2003)
Issue (Month): 3 (September)
Pages: 237-273

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Handle: RePEc:eee:streco:v:14:y:2003:i:3:p:237-273
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  1. Giorgio Fagiolo, 2000. "Endogenous Growth in Open-Ended Economies with Locally Interacting Agents," LEM Papers Series 2000/07, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  2. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
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  7. Freeman, Chris, 1994. "The Economics of Technical Change," Cambridge Journal of Economics, Oxford University Press, vol. 18(5), pages 463-514, October.
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  9. Rosenberg,Nathan, 1994. "Exploring the Black Box," Cambridge Books, Cambridge University Press, number 9780521459556, November.
  10. Fatás, Antonio, 1996. "Endogenous Growth and Stochastic Trends," CEPR Discussion Papers 1340, C.E.P.R. Discussion Papers.
  11. S Durlauf & Danny Quah, 1998. "The New Empirics of Economic Growth," CEP Discussion Papers dp0384, Centre for Economic Performance, LSE.
  12. Alan P. Kirman, 1995. "Economies with Interacting Agents," Discussion Paper Serie A 500, University of Bonn, Germany.
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  14. Chiaromonte, Francesca & Dosi, Giovanni, 1993. "Heterogeneity, competition, and macroeconomic dynamics," Structural Change and Economic Dynamics, Elsevier, vol. 4(1), pages 39-63, June.
  15. Dosi, Giovanni, 1993. "Technological paradigms and technological trajectories : A suggested interpretation of the determinants and directions of technical change," Research Policy, Elsevier, vol. 22(2), pages 102-103, April.
  16. G. Silverberg & B. Verspagen, 1995. "Evolutionary Theorizing on Economic Growth," Working Papers wp95078, International Institute for Applied Systems Analysis.
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  18. Alan Kirman, 1993. "Ants, Rationality, and Recruitment," The Quarterly Journal of Economics, Oxford University Press, vol. 108(1), pages 137-156.
  19. Giovanni Dosi & Luigi Marengo & Giorgio Fagiolo, 2003. "Learning in Evolutionary Environments," LEM Papers Series 2003/20, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  20. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
  21. John Conlisk, 1996. "Why Bounded Rationality?," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 669-700, June.
  22. Cochrane, John H, 1988. "How Big Is the Random Walk in GNP?," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 893-920, October.
  23. Silverberg, Gerald & Verspagen, Bart, 1994. "Collective Learning, Innovation and Growth in a Boundedly Rational, Evolutionary World," Journal of Evolutionary Economics, Springer, vol. 4(3), pages 207-26, September.
  24. Nelson, Richard R, 1998. "The Agenda for Growth Theory: A Different Point of View," Cambridge Journal of Economics, Oxford University Press, vol. 22(4), pages 497-520, July.
  25. Grossman, Gene M. & Helpman, Elhanan, 1991. "Trade, knowledge spillovers, and growth," European Economic Review, Elsevier, vol. 35(2-3), pages 517-526, April.
  26. Alan P. Kirman, 1992. "Whom or What Does the Representative Individual Represent?," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 117-136, Spring.
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