Demand Learning and Firm Dynamics: Evidence from Exporters

Nicolas Berman (1, 2) , Vincent Rebeyrol (3) , Vincent Vicard (4, 5)

1 AMSE - Aix-Marseille Sciences Economiques
2 CEPR - Center for Economic Policy Research
3 TSE-R - Toulouse School of Economics
4 CEPII - Centre d'Etudes Prospectives et d'Informations Internationales
5 Centre de recherche de la Banque de France

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.

Mots clés: firm growth; belief updating; demand; exports; uncertainty

Domaines: Economies et finances

Nicolas Berman, Vincent Rebeyrol, Vincent Vicard. Demand Learning and Firm Dynamics: Evidence from Exporters. 2018. ⟨halshs-01945313⟩