Rob Axtell (George Mason University and the Santa Fe Institute)

“Endogenous Firm Dynamics with 120 Million Agents”

Sala Rossa

abstract

A model in which purposive agents self-organize into teams is demonstrated to closely reproduce empirical data on the population U.S. firms. There are increasing returns within teams and agents move between teams or start new teams when it is in their self-interest to do so. Nash equilibria of the team formation game exist but are dynamically unstable. Team formation dynamics are studied using agent-based computing at full-scale with the U.S. private sector (120 million agents). There arise stationary distributions of team sizes, growth rates, ages, output, productivity, income, and job tenure, growth rates that decline with age, growth rate variance that falls with size and age, and approximately constant returns to scale at the aggregate level. Job-to-job flows, hiring, unemployment and other labor market phenomena occur for microeconomic reasons, without resort to external shocks. The model quantitatively reproduces more than two dozen important regularities associated with firms and labor markets.