Formal models allow us to make verbal notions operational and confront them with data. Schumpeterian growth theory has “operationalized” Schumpeter’s notion of creative destruction -the process by which new innovations replace older technologies-, in two ways. First, it has developed models based on creative destruction that shed new light on several microeconomic aspects of the growth process:...

The size of the informal sector is commonly associated with low per capita GDP and a poor business environment. Recent episodes of reform and growth in several African countries appear to contradict this pattern. From the mid 1980’s onward, Ghana underwent dramatic liberalization and achieved steady growth, yet average firm size in the manufacturing sector fell from 19 to just 9 employees betwe...

It has recently been shown that the firm size distribution is initially skewed to the right and then evolves over time to become more lognormal, and argued that this is likely due to firms initially facing financial constraints, see Cabral and Mata(2003). We conjecture that, if this is true, then such a pattern should be much less apparent for multinational companies for which financial constra...

An agent based model of team formation and wealth distribution is studied. Based on previous work, two incentive structures, one resembling a firm and the second resembling an open source team are used to study the dynamics of team formation. I found that there exist ranges for the number of such teams when agents find it beneficial to join one of the open source teams and when not to. The effe...

We analyze a model of bargaining over new ideas. The model accounts for the problem of information leakage, i.e., the diffusion of information about the idea before and after the idea is implemented. We analyze the effects of information leakage on the distribution of rents within firms and the firms’ stability to the introduction of innovation. In the model, the distribution of rents in a firm...

Technological Innovation, Financial Fragility and Complex Dynamics In this paper we suggest a scaling approach to business cycles. We develop a heterogeneous interacting agents (HIAs) model that replicates well known industrial dynamics stylized facts, as the power law distribution of firms’ size and the Laplace distribution of firms’ growth rates. In particular, the power law is a persistent b...