Journal of Evolutionary Economics

, Volume 18, Issue 3–4, pp 413–432

The microfoundations of business cycles: an evolutionary, multi-agent model

Regular Article


This work presents an evolutionary model of output and investment dynamics yielding endogenous business cycles. The model describes an economy composed of firms and consumers/workers. Firms belong to two industries. The first one performs R&D and produces heterogeneous machine tools. Firms in the second industry invest in new machines and produce a homogenous consumption good. Consumers sell their labor and fully consume their income. In line with the empirical literature on investment patterns, we assume that firms’ investment decisions are lumpy and constrained by their financial structure. Simulation results show that the model is able to deliver self-sustaining patterns of growth characterized by the presence of endogenous business cycles. The model can also replicate the most important stylized facts concerning micro- and macro-economic dynamics.


Evolutionary dynamics Agent-based computational economics Lumpy investment Output fluctuations Endogenous business cycles 

JEL Classification

C15 C22 C49 E17 E22 E32 

Copyright information

© Springer-Verlag 2008

Authors and Affiliations

  • Giovanni Dosi
    • 1
  • Giorgio Fagiolo
    • 2
  • Andrea Roventini
    • 1
    • 3
  1. 1.Sant’Anna School of Advanced StudiesPisaItaly
  2. 2.Laboratory of Economics and ManagementSant’Anna School of Advanced StudiesPisaItaly
  3. 3.University of Modena and Reggio EmiliaModenaItaly

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