Demand Learning and Firm Dynamics: Evidence from Exporters

Nicolas Berman; Vincent Rebeyrol; Vincent Vicard

doi:10.1162/rest_a_00731

Demand Learning and Firm Dynamics: Evidence from Exporters

Nicolas Berman¹; Vincent Rebeyrol²; Vincent Vicard³

¹ Aix-Marseille University, CNRS, EHESS, and CEPR · ² Toulouse School of Economics, University of Toulouse Capitole, Toulouse, France · ³ CEPII and Banque de France

The Review of Economics and Statistics 2019 open access

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.

DOI: 10.1162/rest_a_00731
Volume: 101 (1)
Pages: 91-106
Language: en
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