Dual Labor Market, Inflation, and Aggregate Demand in an Agent-Based Model of the Japanese Macroeconomy

Objective This study aims to connect two strands of the psychology and economics literature, i.e., behavioural finance and agent-based macroeconomics, to assess the impact of managerial overconfidence at the micro and macro levels of the economy as a whole. Method We build a macroeconomic stock-flow consistent agent-based model that is calibrated for the specific case of Poland to explore whether the overconfidence of top corporate managers in the context of their initial capital structure decisions is detrimental for the firms being managed in this way, the financial market dynamics, and the selected macroeconomic indicators. We model heterogeneous firms with different capital structure decision criteria depending on their degree of managerial overconfidence. Our model also includes a complete macroeconomic closure with aggregated households, capital producers, banking, and a public sector. Results We find that firms with overconfident managers outperform in terms of investment and size but are also more fragile, thereby making them more likely to default. Finally, we run policy shocks and show that while investors’ flight to liquidity creates financial turmoil and increases the probability of default. Conclusions This paper contributes to the knowledge base by linking behavioural corporate finance and agent-based macroeconomics. In general, the excess overconfidence on the micro level, either an increase in the proportion of overconfident firms or a higher degree of overconfidence among managers, has a strong destabilizing impact on the economy as a whole on the macro level.

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Public policies and the art of catching up: matching the historical evidence with a multicountry agent-based model

Industrial and Corporate Change ◽

10.1093/icc/dtaa057 ◽

2020 ◽

Author(s):

Giovanni Dosi ◽

Andrea Roventini ◽

Emanuele Russo

Keyword(s):

Aggregate Demand ◽

Heterogeneous Firms ◽

Agent Based Model ◽

Trade Restrictions ◽

Middle Income ◽

Government Interventions ◽

Agent Based ◽

Industrial Policies ◽

Catching Up ◽

International Convergence

Abstract In this article, we study the effects of industrial policies on international convergence using a multicountry agent-based model which builds upon Dosi et al. (2019b, J. Econ. Dyn. Control, 101, 101–129). The model features a group of microfounded economies, with evolving industries, populated by heterogeneous firms that compete in international markets. In each country, technological change is driven by firms’ activities of search and innovation, while aggregate demand formation and distribution follow Keynesian dynamics. Interactions among countries take place via trade flows and international technological imitation. We employ the model to assess the different strategies that laggard countries can adopt to catch up with leaders: market-friendly policies; industrial policies targeting the development of firms’ capabilities and R&D investments, as well as trade restrictions for infant industry protection; protectionist policies focusing on tariffs only. We find that markets cannot do the magic: in absence of government interventions, laggards will continue to fall behind. On the contrary, industrial policies can successfully drive international convergence among leaders and laggards, while protectionism alone is not sufficient to support catching up and countries get stuck in a sort of middle-income trap. Finally, in a global trade war, where developed economies impose retaliatory tariffs, both laggards and leaders are worse off and world productivity growth slows down.

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An Agent-Based Model for Tertiary Educational Choices in Italy

Research in Higher Education ◽

10.1007/s11162-021-09666-4 ◽

2021 ◽

Author(s):

Silvia Leoni

Keyword(s):

Higher Education ◽

Labor Market ◽

Low Income ◽

Financial Support ◽

Individual Preference ◽

Agent Based Model ◽

Average Income ◽

Agent Based ◽

Low Level ◽

The Individual

AbstractAlthough the low level of tuition fees and the absence of other access barriers, Italy is characterized by low educational attainments at the university level. This work models the choice of young Italians to attend university or leave education and enter the labor market, by making use of an agent-based model that reproduces the Italian higher education and policy system. The aim is to analyze the determinants behind university enrollment decisions possibly causing the low level of attainment and explore three alternative scenarios that propose the expansion of financial support and the increase in the average income gap between skilled and unskilled individuals. The model implies that the individual preference to enroll at university depends upon (i) economic motivations, represented by the expectations on future income, which are formed through interaction within individuals’ social network; (ii) influence from peers; (iii) effort of obtaining a university degree. Results show that the model can reproduce observable features of the Italian system, and highlights low income levels and the following full resort to regional scholarships. Experimented scenarios show that policies expanding financial support to education are ineffective, while an increase in the gap between average income of skilled and unskilled workers leads to an increase in enrollment in university, signaling that labor market policies may be more effective than educational policies in raising the number of students in higher education.

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