Income Distribution, Market Size and the Evolution of Industry

Zhu Wang ()

Review of Economic Dynamics, 2008, vol. 11, issue 3, pages 542-565

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)

Keywords: Product diffusion; Industry life cycle; Shakeout (search for similar items in EconPapers)
JEL-codes: D30 O30 L1 (search for similar items in EconPapers)
Date: 2008
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