@article{Berman:291597,
      recid = {291597},
      author = {Berman, Nicolas and Rebeyrol, Vincent and Vicard, Vincent},
      title = {Demand learning and firm dynamics: evidence from  exporters},
      publisher = {The Graduate Institute of International and Development  Studies},
      address = {Geneva. 2015},
      number = {BOOK},
      series = {Graduate Institute of International and Development  Studies Working Paper ; no. 03/2015},
      pages = {35 p., xii},
      year = {2015},
      abstract = {This paper provides evidence that learning about demand is  an important driver of firms' dynamics. We present a simple  model with Bayesian learning in which  firms are uncertain  about their idiosyncratic demand parameter in each of the  markets they serve, and update their beliefs as noisy  information arrives in each period. The model predicts that  firms update more their beliefs following a new demand  shock, the younger they are. To test this learning  mechanism, we make use of a specific feature of  exporter-level data which contains both the values and the  quantities sold by a given firm for the same product in  different destination markets. This allows us to derive a  methodology that identifies separately the demand shocks  faced by the firms and their beliefs about future demand.  We find strong support for our main prediction: The  updating process appears especially strong in the first  years after entry. However, the bulk of accumulated  knowledge is lost during short periods of exit. Second, we  consider implications of this prediction for firm growth  rates and survival. Consistent with the learning model, we  find that: (i) the absolute value of the mean growth rate  for firms' beliefs decreases with age, as does the variance  within cohorts; (ii) exit probability decreases with firms'  beliefs and the demand shock the firm faces. Further,  demand shocks trigger more exit in younger cohorts.},
      url = {http://repository.graduateinstitute.ch/record/291597},
      doi = {https://doi.org/10.71609/iheid-6qdj-3s53},
}