nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2007‒05‒12
six papers chosen by
Matthew Baker
City University of New York

  1. An evolutionary model of industry dynamics and firms' institutional behavior with job search, bargaining and matching By Sandra T. Silva; Jorge M. S. Valente; Aurora A. C. Teixeira
  2. Complexity Thinking and Evolutionary Economic Geography By Ron Martin; Peter Sunley
  3. Economic Geography and the Evolution of Networks By Johannes Gluckler
  4. Droft and Equilibrium Selection with Human and Computer Players By Mauro Caminati; Alessandro Innocenti; Roberto Ricciuti
  5. Selfish in the end? An investigation of consistency and stability of individual behaviour By Jeanette Brosig; Thomas Riechmann; Joachim Weimann
  6. A theoretical framework for Evolutionary Economic Geography: Industrial dynamics and urban growth as a branching process By Koen Frenken; Ron A. Boschma

  1. By: Sandra T. Silva (CEMPRE, Faculdade de Economia da Universidade do Porto, Portugal); Jorge M. S. Valente (LIACC/NIAAD, Faculdade de Economia da Universidade do Porto, Portugal); Aurora A. C. Teixeira (INESC-Porto, Faculdade de Economia da Universidade do Porto, Portugal)
    Abstract: This paper proposes an evolutionary model that captures the main dynamics of a world where heterogeneous firms and workers interact and co-evolve. Within a micro-meso perspective, the model focuses on the influence of firms' "institutional settings" on industry dynamics, formalizing these settings as firms' labor choices. Benefiting from insights offered by mainstream labor economics, we introduce the dynamic processes of job search, bargaining and matching in an evolutionary framework. The results of a computer simulation model show that in a stable environment there is an initial clear improvement in the average fitness of the population of incumbent firms, which then evolves around an evolutionary stationary threshold. The consideration of endogenous matching and bargaining processes in the labor market results in important frictions. Furthermore, the simulation results show an increasing wage inequality between the two types of workers considered in the model. We also consider the effect of both positive and negative demand shocks. The turbulence in the industry increases (decreases) after the negative (positive) demand shock. As expected, the negative demand shock causes a decrease in the number of vacancies and, consequently, the unemployment rates increase considerably. Following the positive demand shock, on the other hand, the firms slightly increase the number of vacancies, so the behavior in terms of unemployment rates is better than in the model without shocks.
    Keywords: evolutionary, firm behavior, job search, bargaining and matching, microfoundations, industrial dynamics
    JEL: B52 D21 L2 J2 J3 O12
    Date: 2007–04
  2. By: Ron Martin; Peter Sunley
    Abstract: Thus far, most of the work towards the construction of an evolutionary economic geography has drawn upon a particular version of evolutionary economics, namely the Nelson-Winter framework, which blends Darwinian concepts and metaphors (especially variety, selection, novelty and inheritance) and elements of a behavioural theory of the firm. Much less attention has been directed to an alternative conception based on complexity theory, yet in recent years complexity theory has increasingly been concerned with the general attributes of evolutionary natural and social systems. In this paper we explore the idea of the economic landscape as a complex adaptive system. We identify several key notions of what is being called the new ‘complexity economics’, and examine whether and in what ways these can be used to help inform an evolutionary perspective for understanding the uneven development and adaptive transformation of the economic landscape.
    Keywords: complexity theory, evolution, economic landscape, networks, emergence, regional adaptation
    JEL: B52 O18 R11 R12
    Date: 2007–04
  3. By: Johannes Gluckler
    Abstract: An evolutionary perspective on economic geography requires a dynamic understanding of change in networks. This paper explores theories of network evolution for their use in geography and develops the conceptual framework of geographical network trajectories. It specifically assesses how tie selection constitutes the evolutionary process of retention and variation in network structure and how geography affects these mechanisms. Finally, a typology of regional network formations is used to discuss opportunities for innovation in and across regions.
    Keywords: evolution, network trajectory, evolutionary economic geography, social network analysis, innovation
    Date: 2007–04
  4. By: Mauro Caminati; Alessandro Innocenti; Roberto Ricciuti
    Abstract: The theory of drift (Binmore and Samuelson 1999) concerns equilibrium selection in which second order disturbances may have first-order effects in the emergence of one equilibrium over the other. We provided experimental evidence with human players supporting the model in Caminati, Innocenti and Ricciuti (2006). In this paper we test it with conditioning by computer players. When computers are removed and humans are matched against each other, the comparative static properties of the model are confirmed.
    Keywords: drift, equilibrium selection, evolutionary games, experiments.
    JEL: C72 C92
    Date: 2007–04
  5. By: Jeanette Brosig (Department of Economics, University of Cologne); Thomas Riechmann (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Joachim Weimann (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: This paper puts three of the most prominent specifications of ‘other-regarding’ preferences to the experimental test, namely the theories developed by Charness and Rabin, by Fehr and Schmidt, and by Andreoni and Miller. In a series of experiments based on various dictator and prisoner’s dilemma games, we try to uncover which of these concepts, or the classical selfish approach, is able to explain most of our experimental findings. The experiments are special with regard to two aspects: First, we investigate the consistency of individual behavior within and across different classes of games. Second, we analyze the stability of individual behavior over time by running the same experiments on the same subjects at several points in time. Our results demonstrate that in the first wave of experiments, all theories of other-regarding preferences explain a high share of individual decisions. Other-regarding preferences seem to wash out over time, however. In the final wave, it is the classical theory of selfish behavior that delivers the best explanation. Stable behavior over time is observed only for subjects, who behave strictly selfish. Most subjects behave consistently with regard to at least one of the theories within the same class of games, but are much less consistent across games.
    Keywords: individual preferences, consistency, stability, experimental economics
    JEL: C91 C90 C72 C73
    Date: 2007–02
  6. By: Koen Frenken; Ron A. Boschma
    Abstract: We propose a framework that specifies the process of economic development as an evolutionary branching process of product innovations. Each product innovation provides a growth opportunity for an existing firm or a new firm, and for an existing city or a new city. One can then obtain both firm size and city size distributions as two aggregates resulting from a single evolutionary process. Gains from variety at the firm level (economies of scope) and the urban level (Jacobs externalities) provide the central feedback mechanism in economic development generating strong path dependencies in the spatial concentration of industries and the specialisation of cities. Gains from size are also expected, yet these are ultimately bounded by increasing wages. The contribution of our framework lies in providing a micro-foundation of economic geography in terms of the interplay between industrial dynamics and urban growth. The framework is sufficiently general to investigate systematically a number of stylised facts in economic geography, while at the same time it is sufficiently flexible to be extended such as to become applicable in more specific micro-contexts. A number of extensions related to the concepts of knowledge spillover and lock-in, are also discussed.
    Keywords: evolutionary economic geography, urban growth, firm growth, Zipf, branching, innovation
    JEL: B25 B52 L11 L25 R0 R1 R12
    Date: 2007–03

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