Working Paper BETA #2019-15

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Title : Structural Transformations and Cumulative Causation: Towards an Evolutionary Micro-foundation of the Kaldorian Growth Model

Author(s) : Andre Lorentz, Tommaso Ciarli, Maria Savona, Marco Valente

Abstract : We build upon the evolutionary model developed in prior works (Ciarli, Lorentz, Savona and Valente 2010b), which formalises the links between production, organisation and functional composition of the employment on the supply side and the endogenous evolution of consumption patterns on the demand side. The main contribution resulting from the exercise proposed here is to derive the Kaldorian cumulative causation mechanism as an emergent property of the dynamics generated by the micro-founded model. More precisely, we discuss the main transition dynamics to a self-sustained growth regime in a two-stage growth patterns generated through the numerical simulation of the model. We then show that these mechanisms lead to the emergence of a Kaldor-Verdoorn law. Finally we show that the structure of demand (among others the heterogeneity in consumption behaviour) itself shapes the type of growth regime emerging from the endogenous structural changes, fostering or hampering the emergence of the Kaldor Verdoorn law.

Key-words : Structural change; growth; consumption; technological change; cumulative causation; evolutionary economics; Kaldor-Verdoorn Law

JEL Classification : O41, L16, C63, E11, O14