Diffusion in a simple classical model. Micro decisions and macro outcomes

David Haas () and Andreas Rainer ()
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David Haas: University of Graz
Andreas Rainer: University of Graz

No CSWP6, Centro Sraffa Working Papers from Centro di Ricerche e Documentazione "Piero Sraffa"

Abstract: The paper explores how a single-sector economy reaches its long-period position if multiple methods of production are simultaneously in use. Firm decisions on investment and on technology provide the basis for two possible mechanisms of convergence: differential growth and imitation. Both mechanisms rely on the concept of extra profits and imply that during a period of disequilibrium economically superior methods of production gradually supersede inferior ones. The model reproduces the stylized fact of sigmoid diffusion curves and shows that diffusion leads to uneven growth with ambiguous long term effects, a change of income distribution and of the industry structure.

Keywords: Sraffa; Schumpeter; classical economics; diffusion; replicator dynamics (search for similar items in EconPapers)
JEL-codes: E11 O33 O41 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2014-09
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