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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. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-51, March.
  2. Durlauf,S.N. & Quah,D.T., 1998. "The new empirics of economic growth," Working papers 3, Wisconsin Madison - Social Systems.
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  4. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
  5. Giovanni Dosi & Luigi Marengo & Giorgio Fagiolo, 1996. "Learning in evolutionary environment," CEEL Working Papers 9605, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia.
  6. Alan P. Kirman, 1995. "Economies with Interacting Agents," Discussion Paper Serie A 500, University of Bonn, Germany.
  7. Ellen R. McGrattan & James A. Schmitz, 1998. "Explaining cross-country income differences," Staff Report 250, Federal Reserve Bank of Minneapolis.
  8. 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.
  9. 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.
  10. Boyan Jovanovic, 1995. "Learning and Growth," NBER Working Papers 5383, National Bureau of Economic Research, Inc.
  11. Richard R. Nelson, 1995. "Recent Evolutionary Theorizing about Economic Change," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 48-90, March.
  12. Mankiw, N. Gregory & Campbell, John, 1989. "International Evidence on the Persistence of Economic Fluctuations," Scholarly Articles 3224417, Harvard University Department of Economics.
  13. repec:oup:qjecon:v:108:y:1993:i:1:p:137-56 is not listed on IDEAS
  14. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  15. John Y. Campbell & N. Gregory Mankiw, 1986. "Are Output Fluctuations Transitory?," NBER Working Papers 1916, National Bureau of Economic Research, Inc.
  16. Rosenberg,Nathan, 1994. "Exploring the Black Box," Cambridge Books, Cambridge University Press, number 9780521452700.
  17. 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.
  18. Freeman, Chris, 1994. "The Economics of Technical Change," Cambridge Journal of Economics, Oxford University Press, vol. 18(5), pages 463-514, October.
  19. Fatas, Antonio, 2000. "Endogenous growth and stochastic trends," Journal of Monetary Economics, Elsevier, vol. 45(1), pages 107-128, February.
  20. G. Silverberg & B. Verspagen, 1995. "Evolutionary Theorizing on Economic Growth," Working Papers wp95078, International Institute for Applied Systems Analysis.
  21. Chiaromonte, Francesca & Dosi, Giovanni, 1993. "Heterogeneity, competition, and macroeconomic dynamics," Structural Change and Economic Dynamics, Elsevier, vol. 4(1), pages 39-63, June.
  22. 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.
  23. 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.
  24. 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.
  25. repec:oup:qjecon:v:102:y:1987:i:4:p:857-80 is not listed on IDEAS
  26. repec:oup:restud:v:56:y:1989:i:4:p:569-82 is not listed on IDEAS
  27. 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.
  28. John Conlisk, 1996. "Why Bounded Rationality?," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 669-700, June.
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