Exploitation, Exploration and Innovation in a Model of Endogenous Growth with Locally Interacting Agents, Structural Change and Economic Dynamics

The paper presents a model of endogenous growth in which firms are modeled as boundedly-rational, locally interacting, agents. Firms produce a homogeneous good employing technologies located in an open-ended technological space and are allowed to either imitate existing similar practices or to locally explore the technological space to find new, more productive, techniques. We first identify sufficient condi-tions for the emergence of empirically plausible GDP time-series characterized by self-sustained growth. Then, we study the trade-off between individual rationality and collective outcomes by providing an example in which more rational agents sys-tematically perform worse than less rational ones