2024/02 | LEM Working Paper Series | ||||||||||||||||
Evolutionary Growth Theory |
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Giovanni Dosi and Andrea Roventini |
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Keywords | |||||||||||||||||
Endogenous growth, structural change, technology-gaps, industrial policies, evolutionary economics, agent-based models
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JEL Classifications | |||||||||||||||||
F41, F43, O4, O3
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Abstract | |||||||||||||||||
This work presents the evolutionary growth theory, which studies the
drivers and patterns of technological change and production together
with the (imperfect) mechanisms of coordination among a multitude of
firms. This requires to studies economies as complex evolving systems,
i.e. as ecologies populated by heterogenous agents whose
out-of-equilibrium local market interactions lead to the emergence of
some collective order at higher level of aggregation, while the system
continuously evolves. Accordingly a multi-country multi-industry
agent-based model is introduced, where the restless competition of
firms in international markets lead to the emergence of growth and
persistent income divergence among countries. Moreover, each economy
experiences a structural transformation of its productive structure
during the development process. Such dynamics results from firm-level
virtuous (or vicious) cycles between knowledge accumulation, trade
performances, and growth dynamics. The model also accounts for a rich
ensemble of empirical regularities at macro, meso and micro levels of
aggregation. Finally, the model is employed to assess different
strategies that laggard countries can adopt to catch up with
leaders. Results show that in absence of government interventions,
laggards will continue to fall behind. On the contrary, industrial
policies can successfully drive international convergence among
countries.
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