ENDOGENOUS ADAPTIVE DYNAMICS IN PASINETTI MODEL OF STRUCTURAL CHANGE

Abstract

This paper formalizes in a very stylized way localized learning of consumers and of producers within Pasinetti model of structural change. In this way, we are able to endogenize technological and consumption dynamics with bounded rational firms and consumers. We show that the theoretical framework here provided is able to deal with process innovation and with product innovation as well. Finally, we point out that our model can easily and consistently incorporate a variety of firms, and therefore it provides a bridge between evolutionary theory and the theory of structural change.