Economics and Finance

   

On the Evolution of Institutional Reforms in a Region: a Bounded Rational Approach

Authors: Georges Sarafopoulos

The paper considers the evolution of institutional reforms in a region during the implementation of a reform, on regional development. In previous work (Sarafopoulos and Ioannidis, 2014) we examined the evolution of the reforms on a region through a difference equation and we demonstrated that the slope of the tax function may change the stability of equilibrium and cause a structure to behave chaotically. In this article we show that by introducing a new parameter we can control the previous instability. For values of the slope which in the previous case created instability resulting a stable equilibrium. But also we prove that the new parameter generates instability and chaos. For some values of this parameter there is a locally stable equilibrium which is the value that maximizes the profit function of the local government. Increasing these values, the equilibrium becomes unstable, through period-doubling bifurcation. The complex dynamics, bifurcations and chaos are displayed by computing numerically Lyapunov numbers and sensitive dependence on initial conditions. Keywords:Regional Development, Institutional Reforms of Local Governments, Difference Equation, Equilibrium, Stability, Chaotic Behavior. JEL Classification: C61, C62, D42

Comments: 9 Pages. Published in The Hellenic Open Business Administration Journal; https://hobajournal.wordpress.com/

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Submission history

[v1] 2018-07-03 23:41:59

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