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School of Economics and Finance

No. 546: Balanced Growth with a Network of Ideas

Christian Ghiglino , Queen Mary, University of London

September 1, 2005

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Abstract

We propose a model of economic growth in which technological progress is modelled as an expanding random network of ideas. New ideas are created by combining successful old ideas. Old ideas are chosen according to their visibility as ideas, success as generators of innovations and age but the process is stochastic. The productivity of an innovation on the other hand depends on the number, importance and success of the neighbors to the parent idea. Within this framework, we isolate the conditions on the law governing the growth of the network compatible with balanced growth. The paper can be viewed as an attempt to provide microfoundations to the set of production functions compatible with the stylized

J.E.L classification codes: D30, D50, D90, O41

Keywords:Economic growth, Technological progress, Innovations, Random growing network, Ideas, Scale-free distributions

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