Abstract
We use a two-factor, two-sector model to study the effects of economic integration and its reversal in the presence of input-generated external economies in one of the sectors. The equilibrium selection problem that arises is solved by applying a simple trial-and-error learning rule. Economic integration can take individual economies ridden with coordination failures to better equilibria, i.e., can solve the coordination problem. We show that integration (and disintegration) may generate cycles in wages, rentals and the sectoral allocation of factors.
Original language | English (US) |
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Pages (from-to) | 463-481 |
Number of pages | 19 |
Journal | Journal of Evolutionary Economics |
Volume | 14 |
Issue number | 4 |
DOIs | |
State | Published - Oct 2004 |
Keywords
- Coordination failures
- Economic (dis)integration
- Input-generated externalities
- Learning rule
- Simulation
ASJC Scopus subject areas
- General Business, Management and Accounting
- Economics and Econometrics