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

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References

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  1. 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.
  2. Sandler, Todd & Tschirhart, John, 1997. "Club Theory: Thirty Years Later," Staff General Research Papers 1226, Iowa State University, Department of Economics.
  3. Daron Acemoglu, 2003. "Patterns of Skill Premia," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 199-230.
  4. Acemoglu, Daron, 1997. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," CEPR Discussion Papers 1707, C.E.P.R. Discussion Papers.
  5. 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.
  6. Karl H. Schlag, 1995. "Why Imitate, and if so, How? A Bounded Rational Approach to Multi-Armed Bandits," Discussion Paper Serie B 361, University of Bonn, Germany, revised Mar 1996.
  7. Schlag, Karl H., 1996. "Which one should I imitate?," Discussion Paper Serie B 365, University of Bonn, Germany.
  8. Daron Acemoglu, 1995. "Matching, Heterogeneity and the Evolution of Income Distribution," Working papers 95-25, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Fernando Vega Redondo, 1996. "The evolution of walrasian behavior," Working Papers. Serie AD, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) 1996-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  10. 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.
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Cited by:
  1. d'Artis Kancs, 2011. "Labour Migration in the Enlarged EU: A New Economic Geography Approach," EERI Research Paper Series EERI_RP_2011_22, Economics and Econometrics Research Institute (EERI), Brussels.
  2. 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.
  3. D'Artis Kancs & Pavel Ciaian, 2011. "Modelling the flow of knowledge and human capital: a framework of innovative capital," International Journal of Public Policy, Inderscience Enterprises Ltd, Inderscience Enterprises Ltd, vol. 7(1/2/3), pages 134-160.
  4. 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, Elsevier, vol. 22(1), pages 30-40, February.

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