Schumpeter meeting Keynes: A policy-friendly model of endogenous growth and business cycles

Authored by Giorgio Fagiolo, Giovanni Dosi, Andrea Roventini

Date Published: 2010-09

DOI: 10.1016/j.jedc.2010.06.018

Sponsors: European Union

Platforms: No platforms listed

Model Documentation: Other Narrative Mathematical description

Model Code URLs: Model code not found

Abstract

This paper studies an agent-based model that bridges Keynesian theories of demand-generation and Schumpeterian theories of technology-fueled economic growth. We employ the model to investigate the properties of macroeconomic dynamics and the impact of public polices on supply, demand and the “fundamentals” of the economy. We find profound complementarities between factors influencing aggregate demand and drivers of technological change that affect both “short-run” fluctuations and long-term growth patterns. From a normative point of view, simulations show a corresponding complementarity between “Keynesian” and “Schumpeterian” policies in sustaining long-run growth paths characterized by milder fluctuations and relatively lower unemployment levels. The matching or mismatching between innovative exploration of new technologies and the conditions of demand generation appear to suggest the presence of two distinct “regimes” of growth (or absence thereof) characterized by different short-run fluctuations and unemployment levels. (C) 2010 Elsevier B.V. All rights reserved.

Tags

Agent-Based Computational Economics Evolutionary economics Empirical Validation Business cycle policies Business cycles Endogenous growth Growth policies