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A simple locally interactive model of ergodic and non-ergodic growth

A simple locally interactive model of ergodic and non-ergodic growth
A simple locally interactive model of ergodic and non-ergodic growth
In this paper we provide a simple locally interactive dynamic model of technology choice and output production. We assume a Cobb-Douglas type production function for two available technologies. The returns to technology 0 are not affected by local spillovers. Technology 1 is more costly, as there is an overhead cost, but it has a higher marginal productivity with respect to net capital. The superiority of technology 1 positively and monotonically depends on the fraction of neighbours using it. We study the aggregate process of technology choices in a model with countably
many firms and repeated choices. The model explains: (i) persistent aggregate fluctuations in the presence of only idiosyncratic shocks, (ii) cross sectional heterogeneity along the dynamics and (iii) the possibility of multiple equilibria. The main contribution of the paper over the existing literature is that the model explains the endogeneous formation of large areas, homogeneous in terms of technology choice and output level, that look stationary along the dynamics.
clusters, contagion, local interaction, nonergodic growth, nonlinear voter model
1935-1690
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 (2004) A simple locally interactive model of ergodic and non-ergodic growth. B.E. Journal of Macroeconomics, 4 (1, article 6).

Record type: Article

Abstract

In this paper we provide a simple locally interactive dynamic model of technology choice and output production. We assume a Cobb-Douglas type production function for two available technologies. The returns to technology 0 are not affected by local spillovers. Technology 1 is more costly, as there is an overhead cost, but it has a higher marginal productivity with respect to net capital. The superiority of technology 1 positively and monotonically depends on the fraction of neighbours using it. We study the aggregate process of technology choices in a model with countably
many firms and repeated choices. The model explains: (i) persistent aggregate fluctuations in the presence of only idiosyncratic shocks, (ii) cross sectional heterogeneity along the dynamics and (iii) the possibility of multiple equilibria. The main contribution of the paper over the existing literature is that the model explains the endogeneous formation of large areas, homogeneous in terms of technology choice and output level, that look stationary along the dynamics.

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More information

Published date: 30 March 2004
Keywords: clusters, contagion, local interaction, nonergodic growth, nonlinear voter model

Identifiers

Local EPrints ID: 71107
URI: https://eprints.soton.ac.uk/id/eprint/71107
ISSN: 1935-1690
PURE UUID: c6aa5df0-868a-4c35-969f-cfe0a8bc5b4b
ORCID for Antonella Ianni: ORCID iD orcid.org/0000-0002-5003-4482

Catalogue record

Date deposited: 20 Jan 2010
Last modified: 03 Oct 2018 00:35

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