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Income Distribution, Market Size and the Evolution of Industry

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  • Zhu Wang

    (Federal Reserve Bank of Kansas City)

Abstract

An industry typically experiences initial mass entry and later shakeout of producers over its life cycle. However, the timing of the evolution varies substantially across markets. By exploring the dynamic interactions between technology progress and demand diffusion, our theory suggests that the cross-market differences of industrial evolution are largely the result of underlying demand factors. Particularly, higher consumer income or larger market size tends to drive faster demand diffusion and earlier industry shakeout. Empirical studies on the US and UK television industries as well as evidence from twenty other US industries support the theoretical findings. (Copyright: Elsevier)

Suggested Citation

  • Zhu Wang, 2008. "Income Distribution, Market Size and the Evolution of Industry," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(3), pages 542-565, July.
  • Handle: RePEc:red:issued:07-110
    DOI: 10.1016/j.red.2007.10.005
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Fumiko Hayashi & Bin Grace Li & Zhu Wang, 2017. "Innovation, Deregulation, and the Life Cycle of a Financial Service Industry," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 26, pages 180-203, October.
    2. James J. McAndrews & Zhu Wang, 2008. "The economics of two-sided payment card markets: pricing, adoption and usage," Research Working Paper RWP 08-12, Federal Reserve Bank of Kansas City.
    3. Kaldasch, Joachim, 2015. "The Product Life Cycle of Durable Goods," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 1-17.
    4. Joachim Kaldasch, 2011. "The Experience Curve and the Market Size of Competitive Consumer Durable Markets," EconStor Preprints 59749, ZBW - German National Library of Economics.
    5. Richard J. Sullivan & Zhu Wang, 2005. "Internet banking: an exploration in technology diffusion and impact," Payments System Research Working Paper PSR WP 05-05, Federal Reserve Bank of Kansas City.
    6. Hayashi, Fumiko & Wang, Zhu, 2008. "Product innovation and network survival in the U.S. ATM and debit card network industry," Research Working Paper RWP 08-14, Federal Reserve Bank of Kansas City, revised 01 Jan 2011.
    7. Bos, Jaap W.B. & Economidou, Claire & Sanders, Mark W.J.L., 2013. "Innovation over the industry life-cycle: Evidence from EU manufacturing," Journal of Economic Behavior & Organization, Elsevier, vol. 86(C), pages 78-91.
    8. Zhu Wang & Fumiko Hayashi, 2011. "Product Innovation and Network Survival in the U.S. ATM and Debit Card Industry," 2011 Meeting Papers 725, Society for Economic Dynamics.
    9. Kaldasch, Joachim, 2011. "Evolutionary model of an anonymous consumer durable market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 390(14), pages 2692-2715.
    10. Kaldasch, Joachim, 2012. "Evolutionäre Diffusion und der Produktlebenszyklus von Gebrauchsgütern," EconStor Preprints 59748, ZBW - German National Library of Economics.
    11. Dmitry I. Malakhov & Nikolay P. Pilnik & Igor G. Pospelov, 2015. "Stability of Distribution of Relative Sizes of Banks as an Argument for the Use of the Representative Agent Concept," HSE Working papers WP BRP 116/EC/2015, National Research University Higher School of Economics.
    12. Kaldasch, Joachim, 2012. "Evolutionary model of the growth and size of firms," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(14), pages 3751-3769.

    More about this item

    Keywords

    Product diffusion; Industry life cycle; Shakeout;

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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