| By: |
Sandra Tavares Silva (CEMPRE, Faculdade de Economia do Porto, Universidade do Porto);
Aurora A.C. Teixeira (CEMPRE, Faculdade de Economia do Porto, Universidade do Porto) |
| Abstract: |
The understanding of the economy's aggregate growth patterns is a fundamental
objective of economic growth theorizing. However, the micro constructions are
strongly linked to economic growth and so cannot be neglected in such process.
This paper is concerned with this problem, proposing a formal mechanism to
establish the bridge between macro regularities and micro evolutionary
behavior. Within a micro to macro or bottom-up perspective, the adopted
approach is focused in the influence of firms’ ‘institutional settings’ on
economic growth and in the industry dynamics that lies behind more aggregate
behaviors. The analysis associates such settings to firms’ labor choices in
terms of hiring/firing policies and to their screening capabilities. Building
a computer simulation model which deals with the nature and evolution of the
knowledge that guides firms’ efforts to improve their institutional settings,
we were able to draw some important implications. The results show that firm’s
ability to change its ‘institutional setting’ is crucial for its survival. In
a model without a learning mechanism the results show significant turbulence
in terms of exit and entry of firms and no significant connection with the
firm’s ‘institutional set’. In the LearnModel, the outcome is much more
stable, with initial firms surviving for long period of time. Results also
suggest that the presence of a learning mechanism is particularly striking in
what concerns firms’ behavior and industry’s dynamics. The survival
probability depends on firms’ hiring efficiency and on their ability to react
to environmental changes. Since firms’ hiring efficiency and their learning
rates depend on their accumulated non-routine workers, the results seem to
imply some ‘lock-in’ paths. Firms with initial low values of relative
non-routine workers have lower chances of survival. However, firms with
initial high values of relative non-routine workers will survive if and only
if they rapidly improve their hiring efficiency. |
| Keywords: |
evolutionary, industrial dynamics, learning, labor decisions |
| JEL: |
D21 D83 L22 M51 |
| Date: |
2006–08 |
| URL: |
http://d.repec.org/n?u=RePEc:por:fepwps:227&r=evo |