Modeling the experimentally organized economy: Complex dynamics in an empirical micro-macro model of endogenous economic growth

Abstract The Swedish micro-to-macro model, MOSES, is used to show how complex economic behavior emerges from interacting, boundedly rational agents. The simulation model has been calibrated using business firm data. Non-linearities arise in its specification of technology, the distribution of firm characteristics and in the rules that govern entry and exit. The model economy is characterized by a restless competitive growth process that is normally robust, but that now and then generates phases of local disorderly behavior including - for some parameter settings - the collapse of entire sectors. The model explains why government agents have difficulty predicting the reactions of the economy to policies, suggesting that government treads cautiously in order not to do more harm than good.

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