Nelson & Winter (1982) Model in Java

	Joseph A. Schumpeter, 1883-1950

Presentation

This applet is an implementation of the basic industry dynamics model of Nelson & Winter(1982, part V). I developed it in order to permit to students to "play" with it and learn some basic evolutionary dynamics. At theoretical level, this applet shares naturally all the limitations of the initial model.

You can find a very quick description of the Nelson & Winter Model in this page.

Components of the applet

This applet is based on two classes:

• EvolFirm.class which describes the basic behavior of the firm: supply, investment, profit, imitation, innovation;
• NelWinApplet.class which defines the interface and the industry's characteristics: Demand function, depreciation rate, maximum productivity, average productivity, market price...

Class documentation generated by javadoc.

I also use the Corejava package from the excellent book of same title:

And the beautiful Graph package of Leigh Brookshaw.

The sources of this applet can now be read online:

• EvolFirm.java
• NelWinApplet.java

Quick description

This applet uses the initialization procedure used in Nelson & Winter (1982):

• The initial capital stock of firms is computed in order to have zero net desired investment;
• Imitative and innovative R&D investment proportions (r_im and r_in) are initialized in order to give particular imitation and innovation probabilities. These probabilities can be modified in the parameters' table before each simulation. Pure imitators have probabilities to innovate of zero. They have the highest firm numbers in the output of the text version.

The parameter table can be used to setup different elements of the model:

• Unit capital cost;
• Coefficient of the demand function (Dem. coeff.): p=Dem/Q^Elasticity;
• Elasticity of demand;
• Initial productivity (initial prod.) of firms in the industry;
• Depreciation rate of the capital;
• Initial probability of an innovative draw (Pr. innovation);
• Initial probability of an imitative draw;
• Standard deviation of the normal distribution from which a new productivity is drawn after an innovation (Dispersion);
• Credits from the banking sector;
• Number of periods;
• Number of innovating firms;
• Number of pure imitators.

Important note:

All the values in the table must be integers. This is why some elements have their name followed by "%" symbol: For these fields, a given integer value will be divided by 100 in order to obtain a float.

Example: A value of 16 in "initial prod." box is converted to 0.16 by the program.

This constraint makes possible the use of some standard elements in CoreJava for checking of values given by the user.

Output

You can observe four graphics which describe the evolution of the industry.

1. Evolution of the market price in time ;
2. Innovation and the diffusion of the technologies (the ratio of Average Productivity to Maximal Productivity) ;
3. Herfindal concentration index for the allocation of capital in the industry (in equivalent firm number) ;
4. Herfindal concentration index of market shares (in equivalent firm number).

This version is much faster and it is possible to study the long term evolution of the industry with many firms.

You must use a Java 1.5 compatible browser for running the model.

Class documentation generated by javadoc.

All comments are also welcome and will be greatly appreciated.

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Murat Yildizoglu's homepage

For a very good exposition of Nelson and Winter's models and their developments, see also Esben Sloth Andersen's Evolutionary economics page

© 1996-2007, Murat Yildizoglu. Last update: January 5, 2008, v.5.2