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Demand Learning and Firm Dynamics: Evidence from Exporters

Author

Listed:
  • Nicolas Berman

    (Aix-Marseille University, CNRS, EHESS, and CEPR)

  • Vincent Rebeyrol

    (Toulouse School of Economics, University of Toulouse Capitole, Toulouse, France)

  • Vincent Vicard

    (CEPII and Banque de France)

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 idiosyncratic demand in each market and update their beliefs as noisy information arrives. Firms update their beliefs to a given demand shock more, the younger they are. We test and empirically confirm this prediction, using the structure of the model, together with exporter-level data, to identify demand shocks and the firms’ beliefs about future demand. Consistent with theory, we also find the learning process to be weakened in more uncertain environments.

Suggested Citation

  • Nicolas Berman & Vincent Rebeyrol & Vincent Vicard, 2019. "Demand Learning and Firm Dynamics: Evidence from Exporters," The Review of Economics and Statistics, MIT Press, vol. 101(1), pages 91-106, March.
    • Handle: RePEc:tpr:restat:v:101:y:2019:i:1:p:91-106
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    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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