Labour Decisions and Industrial Dynamics in an Evolutionary Model: A Neglected Modelling Approach

Within evolutionary economics only a few models have dealt with labour issues. Although some evolutionary models consider distinct types of human capital they do not introduce labour market dynamics. Building a computer simulation model which deals with the nature and evolution of the knowledge that guides firms’ efforts to improve their “institutional settings,” we show that a firm’ s ability to change this setting is crucial for its survival. Our model sheds new lights on the process of firm survival and labour market. The probability of survival depends on the firm’ s hiring efficiency, and there is a learning rate which depends on each firm’ s accumulated non-routine workers. The results seem to imply some ‘lock-in’ paths. Firms with initially low values of relative non-routine workers have lower chances of survival. However, firms with initially high values of relative non-routine workers will survive if and only if they rapidly improve their hiring efficiency. Therefore, the model proposes a formal mechanism to establish a bridge between macro regularities and micro behaviour which is coherent with well known stylized facts from the labour market.