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Dynamic Complementarities, Efficiency and Nash Equilibria for Populations of Firms and Workers

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  • Elvio Accinelli
  • Silvia London
  • Lionello F. Punzo
  • Edgar J. Sanchez Carrera

Abstract

We consider an economy with two types of firms (innovative and non-innovative) and two types of workers (skilled and unskilled), where workers' decisions are driven by imitative behavior, and thus the evolution of such an economy depends on the initial distribution of the firms. We show that there exists a continuous of high level steady states and only one low level and asymptotically stable equilibrium. There exists a threshold value on the initial number of firms to be overcome it to located in the basin of attraction of one of the high level equilibrium. We show that in each high level equilibrium there coexists a share of innovative firms with a share of non-innovative firms, and a share of skilled workers (human capital) coexisting with a share of unskilled workers. But if the initial share of innovative firms is lower than the threshold value, then the economy evolves to a low level equilibrium wholly composed by non-innovative firms and unskilled workers. Finally, we characterise the equilibria as the evolutionarily stable strategies against a field.

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Bibliographic Info

Article provided by Economics and Econometrics Research Institute (EERI), Brussels in its journal Journal of Economics and Econometrics.

Volume (Year): 53 (2010)
Issue (Month): 1 ()
Pages: 90-110

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Handle: RePEc:eei:journl:v:53:y:2010:i:1:p:90-110

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Related research

Keywords: Imitative Behavior; Poverty Traps; Strategic Complementarities; Two Population Normal Form Game; Threshold Value.;

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References

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  1. Daron Acemoglu, 1999. "Patterns of Skill Premia," NBER Working Papers 7018, National Bureau of Economic Research, Inc.
  2. Apesteguia, Jose & Huck, Steffen & Oechssler, Joerg, 2003. "Imitation - Theory and Experimental Evidence," University of California at Santa Barbara, Economics Working Paper Series qt3h0887tj, Department of Economics, UC Santa Barbara.
  3. Fernando Vega-Redondo, 1997. "The Evolution of Walrasian Behavior," Econometrica, Econometric Society, vol. 65(2), pages 375-384, March.
  4. Schlag, Karl H., 1994. "Why Imitate, and if so, How? Exploring a Model of Social Evolution," Discussion Paper Serie B 296, University of Bonn, Germany.
  5. Daron Acemoglu, 1998. "Why Do New Technologies Complement Skills? Directed Technical Change And Wage Inequality," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1055-1089, November.
  6. Sandler, Todd & Tschirhart, John, 1997. "Club Theory: Thirty Years Later," Staff General Research Papers 1226, Iowa State University, Department of Economics.
  7. Daron Acemoglu, 1995. "Matching, Heterogeneity and the Evolution of Income Distribution," Working papers 95-25, Massachusetts Institute of Technology (MIT), Department of Economics.
  8. Schlag, Karl H., 1999. "Which one should I imitate?," Journal of Mathematical Economics, Elsevier, vol. 31(4), pages 493-522, May.
  9. Karl H. Schlag, . "Why Imitate, and if so, How? A Bounded Rational Approach to Multi- Armed Bandits," ELSE working papers 028, ESRC Centre on Economics Learning and Social Evolution.
  10. Schultz, Theodore W, 1975. "The Value of the Ability to Deal with Disequilibria," Journal of Economic Literature, American Economic Association, vol. 13(3), pages 827-46, September.
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Cited by:
  1. Kancs, d'Artis & Kielyte, Julda, 2010. "European Integration and Labour Migration," European Integration online Papers (EIoP), European Community Studies Association Austria (ECSA-A), vol. 14, November.
  2. Accinelli, Elvio & Sanchez Carrera, Edgar J., 2011. "Strategic complementarities between innovative firms and skilled workers: The poverty trap and the policymaker's intervention," Structural Change and Economic Dynamics, Elsevier, vol. 22(1), pages 30-40, February.

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