History Dependence in the Economy. A review of the Literature

This paper presents a review on the concept of history dependence and time irreversibiliTY in the economic literature. It presents an inventory of artificial examples where random events affect final outcomes and history cannot be reduced to the deliverer of the inevitable. It focuses mainly on recent examples and applications that, although not necessarily better than their predecessors, allow a better understanding of the mechanisms whereby history leaves its imprint. The paper reviews deterministic and stochastic models, presents some empirical illustrations and draws a few general conclusions.

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