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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
  • Maria Enrica Virgillito

Abstract

Evolutionary theories of economic change identify the processes of idiosyncratic learningby 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.

Suggested Citation

  • Giovanni Dosi & Marcelo C. Pereira & Maria Enrica Virgillito, 2015. "The footprint of evolutionary processes of learning and selection upon the statistical properties of industrial dynamics," LEM Papers Series 2015/04, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    • Handle: RePEc:ssa:lemwps:2015/04
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    More about this item

    Keywords

    Firms' Growth Rate; Productivity; Fat Tail Distributions; Learning Processes; Market Selection;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L6 - Industrial Organization - - Industry Studies: Manufacturing

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