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Demand Learning and Firm Dynamics: Evidence from Exporters

Nicolas Berman, Vincent Rebeyrol and Vincent Vicard
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Nicolas Berman: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique, CEPR - Center for Economic Policy Research - CEPR
Vincent Rebeyrol: TSE - Toulouse School of Economics - Toulouse School of Economics
Vincent Vicard: CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique, Centre de recherche de la Banque de France - Banque de France

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Abstract: This paper provides direct evidence that learning about demand is an important driver of firms' dynamics. We present a model of Bayesian learning in which firms are uncertain about their idiosyncratic demand in each of the markets they serve, and update their beliefs as noisy information arrives. Firms are predicted to update more their beliefs to a given demand shock, the younger they are. We test and empirically confirm this prediction, using the structure of the model together with exporter-level data to identify idiosyncratic demand shocks and the firms' beliefs about future demand. Consistent with the theory, we also find that the learning process is weaker in more uncertain environments.

Keywords: firm growth; belief updating; demand; exports; uncertainty (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec
Date: 2018-12
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01945313
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