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Firm Turnover and the Rate of Macro Economic Growth: Simulating the Macroeconomic Effects of Schumpeterian Creative Destruction

Author

Listed:
  • Gunnar Eliasson
  • Gunnar Eliasson

    (The Ratio Institute (and The Royal Institute of Technology), Stockholm, Sweden)

  • Dan Johansson

    (The Ratio Institute (and The Royal Institute of Technology), Stockholm, Sweden)

  • Erol Taymaz

    (Department of Economics, Ankara, Turkey)

Abstract

The positive effects of new innovative entry and fast and efficient allocation of resources are balanced against the efficiency of price signaling in markets in a non-linear micro based simulation model of an Experimentally Organized Economy (EOE). In this model increasingly rapid reallocation of resources over markets, moved by innovative new entry and competitive exit (the rate of firm turnover) generates faster growth in output, but eventually, if too fast, is shown to affect the reliability of price signaling in markets and to raise the frequency of investment mistakes. Beyond a certain level of the rate of firm turnover the aggregate effects at the macro level, therefore, turn negative. This optimal growth trajectory depends on the balance between the rates of entry and exit and on the performance of new firms compared to incumbents, their size compared to incumbents and the variation in the same characteristics.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Gunnar Eliasson & Gunnar Eliasson & Dan Johansson & Erol Taymaz, 2024. "Firm Turnover and the Rate of Macro Economic Growth: Simulating the Macroeconomic Effects of Schumpeterian Creative Destruction," International Journal of Microsimulation, International Microsimulation Association, vol. 17(2), pages 279-296.
    • Handle: RePEc:ijm:journl:v:17:y:2024:i:2:p:279-296
    DOI: 10.34196/ijm.00299
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    Cited by:

    1. is not listed on IDEAS
    2. Grzegorz Go³êbiowski & Piotr Russel, 2015. "Business Dynamics In Poland In Comparison To Selected Countries," GUT FME Conference Publications, in: Blazej Prusak (ed.),ENTERPRISES IN UNSTABLE ECONOMY, chapter 14, pages 182-196, Faculty of Management and Economics, Gdansk University of Technology.
    3. Eyüp …zveren, 2011. "Adventures of an Austrian Trio Ahead: The Influence of Schumpeter, Polanyi and Hayek in Turkey and the Dissemination of their Work," Chapters, in: Heinz D. Kurz & Tamotsu Nishizawa & Keith Tribe (ed.), The Dissemination of Economic Ideas, chapter 8, Edward Elgar Publishing.
    4. Eliasson, Gunnar & Johansson, Dan & Taymaz, Erol, 2004. "Simulating the New Economy," Structural Change and Economic Dynamics, Elsevier, vol. 15(3), pages 289-314, September.
    5. Eliasson, Gunnar & Eliasson, Åsa, 2004. "The Theory of the Firm and the Markets for Strategic Acquisitions," Ratio Working Papers 44, The Ratio Institute.
    6. Eliasson, Gunnar, 2004. "Ignorant Actors in the Resource Rich World of the Knowledge Based Economy - On Rational Management in an Experimentally Organized Economy (EOE)," Ratio Working Papers 47, The Ratio Institute.
    7. Dan Johansson, 2010. "The theory of the experimentally organized economy and competence blocs: an introduction," Journal of Evolutionary Economics, Springer, vol. 20(2), pages 185-201, April.

    More about this item

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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