Backwash and Spread: Effects of Trade Networks in a Space of Agents who Learn by Doing

Roger McCain

No 542, Computing in Economics and Finance 1999 from Society for Computational Economics

Abstract: This study focuses on the widely observed phenomenon of leading and lagging areas in economic development. Trade may be a source of spread effects, which promote convergence where dichotomization could otherwise occur, or of backwash effects, which could exacerbate or even independently cause dichotomization. Beginning from a cellular model of growth with learning by doing, in which long-lasting dichotomization is observed, trade is introduced in order to investigate the implications of spread and backwash effects. The trade network is initialized as a random Boolean network. Each "agent" shops among the established trading partners for the best deal and trades accordingly, but also may, partly at random, drop or add a trading relationship, so that the trading network becomes endogenous. The probability of dropping a trading partner is inversely related to the time since the last trade, while the probability of adding a new trading partner is inversely related to distance, and hence presumably to transportation cost. Comparative simulations are undertaken to determine, first, whether trade increases or reduces dichotomization relative to the no-trade case, and second, to what extent the answer to this question is sensitive to specific parameters of the model.

Date: 1999-03-01
New Economics Papers: this item is included in nep-cmp, nep-evo and nep-ind
References: Add references at CitEc
Citations: View citations in EconPapers (1)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sce:scecf9:542

Access Statistics for this paper

More papers in Computing in Economics and Finance 1999 from Society for Computational Economics CEF99, Boston College, Department of Economics, Chestnut Hill MA 02467 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F. Baum ().