When Less Is Not Too Little: On the Adaptation to Adverse Endowment Conditions in Artificial Economies

Bernard Borges and Gregory M. Werner - Max Planck Institute for Psychological Research

This paper investigates the comparative economic development of differentially endowed economies as an adaptive process. We use an agent-based simulation model of two developing economies to investigate the effects on development when two economies with different resource endowments are initially sheltered from competition with each other. Specifically, the two economies are initially treated as closed, independently evolving systems operating under different resource endowments. We then tear down the trade walls separating the two economy and have both economies compete against each other in a unified market. Particular attention is focused on the degree of trade protection required by a less well endowed economy to develop as a successful competitor against a better endowed economy.

Scheduled for Session 2.6 Agent - Based Computational Economics - I