Dynamic Complementarities, Efficiency and Nash Equilibria for Populations of Firms and Workers

Elvio Accinelli, Silvia London, Lionello F. Punzo and Edgar J. Sanchez Carrera

Journal of Economics and Econometrics, 2010, vol. 53, issue 1, 90-110

Abstract: We consider an economy with two types of firms (innovative and non-innovative) and two types of workers (skilled and unskilled), where workers' decisions are driven by imitative behavior, and thus the evolution of such an economy depends on the initial distribution of the firms. We show that there exists a continuous of high level steady states and only one low level and asymptotically stable equilibrium. There exists a threshold value on the initial number of firms to be overcome it to located in the basin of attraction of one of the high level equilibrium. We show that in each high level equilibrium there coexists a share of innovative firms with a share of non-innovative firms, and a share of skilled workers (human capital) coexisting with a share of unskilled workers. But if the initial share of innovative firms is lower than the threshold value, then the economy evolves to a low level equilibrium wholly composed by non-innovative firms and unskilled workers. Finally, we characterise the equilibria as the evolutionarily stable strategies against a field.

Keywords: Imitative Behavior; Poverty Traps; Strategic Complementarities; Two Population Normal Form Game; Threshold Value. (search for similar items in EconPapers)
JEL-codes: C72 C79 D83 O10 O12 O30 (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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