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The Co-evolution of Institutions and Technology

Desiree Desierto

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: We propose a model of growth driven by the co-evolution of institutions and technology. To be consistent with Douglass North (1990, 1991, 1994), institutions are defined as a type of collective knowledge about a specific environment that can prescribe how to adapt general technology before the latter can be actually used. Institutions, then, are treated as a factor in the innovation process, and as such can be purposely accumulated. The simultaneous accumulation of institutions and technology are modeled as an evolutionary game whereby boundedly-rational .rms choose how much to allocate to ‘institutional spending’ vis-a-vis research expenditures, in anticipation of changes in monopoly pro.ts from technological innovation. Using Taylor and Jonker’s (1978) Replicator Dynamics to describe the evolution of such strategies, we are able to show how this transition process converges to the steady state model of Romer (1990).

Keywords: endogenous growth; institutions; technological change (search for similar items in EconPapers)
JEL-codes: O30 O33 O49 P48 Z13 (search for similar items in EconPapers)
Pages: 33
Date: 2005-12
New Economics Papers: this item is included in nep-evo, nep-ict, nep-ino and nep-pke
Note: Ma
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