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Exploitation, Exploration and Innovation in a Model of Endogenous Growth with Locally interacting Agents

  • Giorgio Fagiolo
  • Giovanni Dosi

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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Paper provided by Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy in its series LEM Papers Series with number 2002/25.

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Date of creation: 29 Dec 2002
Date of revision:
Handle: RePEc:ssa:lemwps:2002/25
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  1. S Durlauf & Danny Quah, 1998. "The New Empirics of Economic Growth," CEP Discussion Papers dp0384, Centre for Economic Performance, LSE.
  2. 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.
  3. Jovanovic, Boyan & Rob, Rafael, 1989. "The Growth and Diffusion of Knowledge," Review of Economic Studies, Wiley Blackwell, vol. 56(4), pages 569-82, October.
  4. Mankiw, N. Gregory & Campbell, John, 1989. "International Evidence on the Persistence of Economic Fluctuations," Scholarly Articles 3224417, Harvard University Department of Economics.
  5. Chiaromonte, Francesca & Dosi, Giovanni, 1993. "Heterogeneity, competition, and macroeconomic dynamics," Structural Change and Economic Dynamics, Elsevier, vol. 4(1), pages 39-63, June.
  6. Fatas, Antonio, 2000. "Endogenous growth and stochastic trends," Journal of Monetary Economics, Elsevier, vol. 45(1), pages 107-128, February.
  7. Campbell, John Y & Mankiw, N Gregory, 1987. "Are Output Fluctuations Transitory?," The Quarterly Journal of Economics, MIT Press, vol. 102(4), pages 857-80, November.
  8. Kirman, Alan, 1993. "Ants, Rationality, and Recruitment," The Quarterly Journal of Economics, MIT Press, vol. 108(1), pages 137-56, February.
  9. Aghion, P. & Howitt, P., 1990. "A Model Of Growth Through Creative Destruction," DELTA Working Papers 90-12, DELTA (Ecole normale supérieure).
  10. 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.
  11. Boyan Jovanovic, 1995. "Learning and Growth," NBER Working Papers 5383, National Bureau of Economic Research, Inc.
  12. 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.
  13. Richard R. Nelson, 1995. "Recent Evolutionary Theorizing about Economic Change," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 48-90, March.
  14. Alan P. Kirman, 1994. "Economies with Interacting Agents," Working Papers 94-05-030, Santa Fe Institute.
  15. Dosi, Giovanni, 1982. "Technological paradigms and technological trajectories : A suggested interpretation of the determinants and directions of technical change," Research Policy, Elsevier, vol. 11(3), pages 147-162, June.
  16. 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.
  17. Joshua M. Epstein & Robert L. Axtell, 1996. "Growing Artificial Societies: Social Science from the Bottom Up," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262550253, June.
  18. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
  19. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  20. Gene M. Grossman & Elhanan Helpman, 1990. "Trade, Knowledge Spillovers, and Growth," NBER Working Papers 3485, National Bureau of Economic Research, Inc.
  21. John Conlisk, 1996. "Why Bounded Rationality?," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 669-700, June.
  22. repec:cup:cbooks:9780521452700 is not listed on IDEAS
  23. G. Silverberg & B. Verspagen, 1995. "Evolutionary Theorizing on Economic Growth," Working Papers wp95078, International Institute for Applied Systems Analysis.
  24. repec:cup:cbooks:9780521459556 is not listed on IDEAS
  25. Freeman, Chris, 1994. "The Economics of Technical Change," Cambridge Journal of Economics, Oxford University Press, vol. 18(5), pages 463-514, October.
  26. McGrattan, Ellen R. & Schmitz, James Jr., 1999. "Explaining cross-country income differences," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 10, pages 669-737 Elsevier.
  27. 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.
  28. 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.
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