Antonio D'Agata
Endogenous adaptive dynamics in Pasinetti model of structural change

Abstract: This paper formalises in a very stylised way localised learning of consumers and of producers within Pasinetti model of structural change (Pasinetti (1965, 1981, 1993)). Unlike Pasinetti model and other models of structural change, which either consider technological change exogenously given (see e.g. Baumol (1967), Pasinetti (1965, 1981, 1993), Araujo, R.A., Texeira, J.R. (2002)) or assume perfect rationality (see, e.g. Laitner (2001), Kogensmut, Rebelo et (2001)), in this paper we endogenise technological and consumption dynamics by assuming bounded rational firms and consumers. We provide a concept of (secular) equilibrium and study the dynamic properties of the economy. We show also that the theoretical framework here provided is able not only to deal with improvements in methods of production, but it is also able to deal with product innovation as well. Moreover, our model can easily and consistently incorporate a variety of firms, this allowing the study of the dynamics of the economy from an evolutionary point if view (see e.g. Metcalfe (1995), (1998)). Therefore, our model could be interpreted as providing also a bridge between the literature on structural change and that one on evolutionary dynamics.

JEL: C62, D57, O30
Keywords: structural dynamics, technicl change, learning



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