Production structure and economic fluctuations

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Ciarli, Tommaso and Valente, Marco (2006) Production structure and economic fluctuations. Working Paper. Laboratory of Economics and Management, Sant'Anna School of Advanced Studies, Pisa.

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Abstract

We aim at contributing to the debate on the mechanisms and properties of economic fluctuations. We consider a crucial aspect among many thought to influence this ubiquitous and extremely relevant phenomenon: the interaction structure that characterises the organisation of production, that is, the production relation among sectors of a system. We build — and simulate — a very simple model representing an input–output system where sectors/firms adapt production and desired levels of stocks. Their output serves both an exogenous final demand and the intermediate demand solicited by the other sectors of the system. Series of simulation runs allow to derive relevant and non–obvious conclusions concerning the levels and, more importantly, the volatility of economic activity, as an outcome of the same, inherent, economic structure. We claim that the results that we obtain through the highly abstract representation we use, provide useful intuitions on the working of economic cycles, to be later integrated by further studies. As a by–product of our analysis, we also suggest that the methodology we adopt can provide valuable insights by allowing a detailed analysis of the time path generated in the artificial systems, and there- fore assessing with precisions the same mechanisms that affect real–world systems. The natural following step, left for further research, is to investigate how those mechanisms are empirically generated.

Item Type: Reports and working papers (Working Paper)
Additional Information: Working paper 2007/02
Schools and Departments: School of Business, Management and Economics > SPRU - Science Policy Research Unit
Subjects: H Social Sciences > HB Economic theory. Demography
Depositing User: Tommaso Ciarli
Date Deposited: 16 Oct 2015 09:03
Last Modified: 16 Oct 2015 09:03
URI: http://srodev.sussex.ac.uk/id/eprint/57180

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