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Demand Learning and Firm Dynamics: Evidence from Exporters

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.
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Nicolas Berman, Vincent Rebeyrol, Vincent Vicard. Demand Learning and Firm Dynamics: Evidence from Exporters. Review of Economics and Statistics, Massachusetts Institute of Technology Press (MIT Press), 2019, 101 (1), pp.91-106. ⟨10.1162/rest_a_00731⟩. ⟨hal-02111159⟩

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