The Inquiry of Labor Market Dynamics in Knowledge Economies: An Agent-Based Approach

Elucidating the dynamics of national labor trends is a highly complex problem, as the labor market system is an interaction and interrelation of many variables and subsystems. To understand firm behavior and hence enable effective policy making, one must adopt a systems thinking and evolutionary approach to study the interplay of these forces and systems. This paper advocates the use of agent-based modeling to study labor market dynamics in a knowledge-based economy, in particular, the emergence of firm strategies and macroeconomic phenomena. An agent-based model is developed to simulate a labor market where firms post job offers to fill vacancies and decide how to choose and remunerate employees. Employees are initialized with a certain skill level and select jobs by comparing job offers. We then allow evolutionary forces to “select” firms that best survive in a given scenario and explore the strategies that emerge from interconnected systems and processes.