Brand effects, mobility costs and industry evolution

Abstract

In this paper I present a model that was built in order to analyse the interdependencies between labour market dynamics and the evolution of industries’ structure. Being inspired by the case of consultancy services, the model integrates many of the features typically found in those industries. In particular, problems of incomplete information, the role of ‘brand effects’, and constraints in the supply of specialised labour, are taken into account. This model is able to reproduce many of the empirical regularities that have been identified in studies of industrial dynamics on the basis of causal mechanisms that are absent from most theoretical models, and it shows to be a useful tool in understanding some features of the evolution of real world industries.