Cooperative Behavior and Economic Growth
|Author(s):|| PhDr. Jaromír Baxa Ph.D., |
|ISSN / ISBN:|
|Published in:||ÚTIA AV ČR Research Report|
|Keywords:||cooperation, iterated prisoner's dilemma, economic growth, institutional change, agent-based modeling|
|JEL codes:||D70, K42, O12, Z13|
|Suggested Citation:||Baxa, J. (2009). Cooperative Behavior and Economic Growth. Institute of Information Theory and Automation, Academy of Sciences of the Czech Republic, Research Report No. 2255.|
|Grants:||402/07/0890 GA CR (2007-2009): Network Approaches to Economic Modeling IES Research Framework Institutional task (2005-2011) Integration of the Czech economy into European union and its development Trust and Cooperation in Economics: An Inquiry into Formal and Empirical Applications|
|Abstract:|| In this paper, we investigate the relative importance of cooperative behavior and environment for economic growth in simulated economies. We consider a simple world populated by individuals who can either utilize resources from their environment or create wealth within interactions with other agents. Each newly created piece of wealth is then divided among agents participating in that particular interaction similarly to the prisoner's dilemma game. Along with the other literature, the cooperative behavior and the ability to enforce cooperation are the key factors for long-term sustainable economic growth in our simulations.
Interestingly, the effect of enforcement and punishment of piracy was not always positive: Introducing such mechanism caused elimination of the most successful agents without the positive effects on cooperation and productive economic activity. Hence, the income was lower for low enforcement rate than for the economies without any mechanism supporting cooperation. Similar effects occurred in the simulations of institutional change. In case of a discontinuous change, a radical enforcement mechanism was implemented in one point of time and it caused a sharp fall of wealth. Nevertheless, after some time the positive effects of cooperation dominated and economic growth emerged. As far as gradual approach to an institutional change concerns, steady stagnation instead of sharp fall was generated and the recovery was slower, too.