Time Allocation, the Dynamics of Interaction, and Technology Adoption

Abstract

Inspired by recent literature that approaches the dissemination of knowledge from a social interaction perspective, the article explores the dynamics of a prototypical optimal control growth problem structured upon the following features: (i) the model economy is populated by a large number of rational agents; (ii) each agent allocates time, optimally, among production and social interaction; (iii) knowledge spreads through the contact with others; (iv) the propagation of ideas follows two steps—in a first stage, interaction promotes the acquisition of theoretical knowledge and, in a second stage, it works as a catalyst for the successful implementation of the theory to practical productive uses; (v) interaction contributes not only to the diffusion of a given state of technical knowledge—it fosters, as well, the growth of ideas and techniques. The model allows for the endogenous determination of optimal trajectories concerning the allocation of time and the intensity of interaction; moreover, a long-term endogenous growth rate for the economy is derived, with optimal growth being essentially driven by the state of techniques and by the forces that shape the human interaction process.