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A simple locally interactive model of ergodic and nonergodic growth

A simple locally interactive model of ergodic and nonergodic growth
A simple locally interactive model of ergodic and nonergodic growth
In this paper we propose a locally interactive model which explains both the cross sectional dynamics as well as the possibility of multiple long run equilibria. Firms can choose between two technologies say 1 and 0; the returns from technology 1 are affected by the number of neighboring firms using it; the returns from technology 0 are independent of neighboring firms technological choices. Durlauf (1993) explains nonergodic growth via strong technological complementarities. By modeling in a different way the transmission of the spillover effects, we show that in presence of technological complementarities of intermediate strength we have either two or infinitely many long run equilibria. The basin of attraction of these equilibria depend on the initial conditions. On the other hand when the technological complementarities are either very weak or very strong then we have a unique long run equilibrium. As for the dynamic behavior, we shall explain the formation of large connected areas, clusters. As the cluster size grows at a rate slower than t, such areas seem to be stationary along the dynamics.
10
University of Southampton
Corradi, Valentina
60cb9048-292c-46d0-93b5-708e6849c6a1
Ianni, Antonella
35024f65-34cd-4e20-9b2a-554600d739f3
Corradi, Valentina
60cb9048-292c-46d0-93b5-708e6849c6a1
Ianni, Antonella
35024f65-34cd-4e20-9b2a-554600d739f3

Corradi, Valentina and Ianni, Antonella (2000) A simple locally interactive model of ergodic and nonergodic growth (Discussion Papers in Economics and Econometrics, 10) Southampton, GB. University of Southampton 29pp.

Record type: Monograph (Discussion Paper)

Abstract

In this paper we propose a locally interactive model which explains both the cross sectional dynamics as well as the possibility of multiple long run equilibria. Firms can choose between two technologies say 1 and 0; the returns from technology 1 are affected by the number of neighboring firms using it; the returns from technology 0 are independent of neighboring firms technological choices. Durlauf (1993) explains nonergodic growth via strong technological complementarities. By modeling in a different way the transmission of the spillover effects, we show that in presence of technological complementarities of intermediate strength we have either two or infinitely many long run equilibria. The basin of attraction of these equilibria depend on the initial conditions. On the other hand when the technological complementarities are either very weak or very strong then we have a unique long run equilibrium. As for the dynamic behavior, we shall explain the formation of large connected areas, clusters. As the cluster size grows at a rate slower than t, such areas seem to be stationary along the dynamics.

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Published date: April 2000

Identifiers

Local EPrints ID: 32963
URI: https://eprints.soton.ac.uk/id/eprint/32963
PURE UUID: a14b2521-4e41-44b0-9d10-c16d14ce0eb4
ORCID for Antonella Ianni: ORCID iD orcid.org/0000-0002-5003-4482

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Date deposited: 18 Jul 2006
Last modified: 03 Oct 2018 00:35

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