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Research Master Pre-Defense

R&D and technological change dynamics under learning: the case of the Grossman-Helpman model

  • Series
    Research Master Defense
  • Speaker
    Sebastian Kreuzmair
  • Location
    Online
  • Date and time

    August 30, 2021
    14:00 - 15:00

In this paper the Grossman and Helpman (1991) model is modified to incorporate boundedly rational firms that try to learn the optimal strategy using a reinforcement learning algorithm. The results show that the economy spends a significant amount of time in disequilibrium and does not converge to an equilibrium in the analyzed time frame. Relative to the rational equilibrium firms invest to little in R&D. The lack of convergence to the rational strategies indicates that the assumed degree of rationality is a key consideration in macroeconomic modelling and should be carefully considered on a case by case basis.