2015/04 | LEM Working Paper Series | |
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The footprint of evolutionary processes of learning and selection upon the statistical properties of industrial dynamics |
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Giovanni Dosi, Marcelo C. Pereira and Maria Enrica Virgillito |
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Keywords | ||
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Firms' Growth Rate, Productivity, Fat Tail Distributions, Learning Processes, Market Selection
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JEL Classifications | ||
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C63, L11, L6
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Abstract | ||
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Evolutionary theories of economic change identify the processes of
idiosyncratic learning by individual firms and of market selection as
the two main drivers of the dynamics of industries. Are such processes
able to robustly account for the statistical regularities which
industrial structures and dynamics display? In this work we address
this question by means of a simple agent-based model formalizing the
mechanisms of learning and selection. The interplay between these two
engines shapes the dynamics of entry-exit and market shares and,
collectively, the productivity and the size distributions and their
patterns of growth. As such, and despite its simplicity, the model is
able to robustly reproduce an ensemble of empirical stylised facts,
including ample heterogeneity in productivity distributions,
persistent market turbulence and fat-tailed distribution of growth
rates.
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