The footprint of evolutionary processes of learning and selection upon the statistical properties of industrial dynamics

Abstract

Evolutionary theories of economic change identify the processes of idiosyncratic learning by individual firms and of market selection as the two main drivers of the dynamics of industries. Are such processes able to account for the statistical regularities which industrial structures and dynamics display? In this work we address this question by means of a simple multi-firm model formalizing the mechanisms of learning and selection. As such, despite its simplicity, the model is able to robustly reproduce an ensemble of empirical stylized facts, including ample heterogeneity in productivity distributions, persistent market turbulence, and fat-tailed distribution of growth rates.