Explaining development patterns through interactions between local and international systems

Tommaso Ciarli, Department of Economics, University of Ferrara

We propose a micro based development model with out--of--equilibrium dynamics, reached through endogenous processes. The supply side is agent--based, while the demand side has an aggregate representation.

In particular, we design an `abstract' configuration of a local system in which different firms, pertaining to different sectors, produce different goods across and within them. The main features of the model are: i) a production function which produce the output as a combination of input features and firm specific competencies in moulding them, and represents it as a set of features in itself; ii) the reproduction of an economic system characterised by input-output relations between firms.

We model the simultaneous decision of the quantity to produce by firms that have input output relations, through mechanism of supplier selection and input orders. Those routines entail procedures on quantity variations, exogenous and endogenous stock changes, and input variation constraints in approaching the target quantity. The dynamic is pulled by consumers' final demand and firms business demand.

The structure of the relations between firms affects the growth of an economic system, depending on the interdependence of the sector inside the economy, and the need to rely on external inputs. The model is used to undergo dynamic comparative analysis on the role of product specialisation and market configuration, and the configuration of local production systems.

Date: 11 May-00 0000