Stochastic Lotka-Volterra equations: a model of lagged diffusion of technology in an interconnected world

Abstract

We present a model of technological evolution due to interaction between multiple countries and the resultant effects on the corresponding macro variables. The world consists of a set of economies where some countries are leaders and some are followers in the technology ladder. All of them potentially gain from technological breakthroughs. Applying Lotka-Volterra (LV) equations to model evolution of the technology frontier, we show that the way technology diffuses creates repercussions in the partner economies. This process captures the spill-over effects on major macro variables seen in the current highly globalized world due to trickle-down effects of technology.