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Equilibrium Imitation and Growth

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  • Jesse Perla
  • Christopher Tonetti

Abstract

The least productive agents in an economy can be vital in generating growth by spurring technology diffusion. We develop an analytically tractable model in which growth is created as a positive externality from risk taking by firms at the bottom of the productivity distribution imitating more productive firms. Heterogeneous firms choose to produce or pay a cost and search within the economy to upgrade their technology. Sustained growth comes from the feedback between the endogenously determined distribution of productivity, as evolved from past search decisions, and an optimal, forward-looking search policy. The growth rate depends on characteristics of the productivity distribution, with a thicker-tailed distribution leading to more growth.

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File URL: http://www.jstor.org/stable/full/10.1086/674362
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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 122 (2014)
Issue (Month): 1 ()
Pages: 52 - 76

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Handle: RePEc:ucp:jpolec:doi:10.1086/674362

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References

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  1. Poschke, Markus, 2007. "Employment Protection, Firm Selection, and Growth," IZA Discussion Papers 3164, Institute for the Study of Labor (IZA).
  2. Robert E. Lucas Jr. & Benjamin Moll, 2014. "Knowledge Growth and the Allocation of Time," Journal of Political Economy, University of Chicago Press, vol. 122(1), pages 1 - 51.
  3. Jess Benhabib & Mark Spiegel, 2002. "Human capital and technology diffusion," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
  4. Xavier Gabaix, 2008. "Power Laws in Economics and Finance," NBER Working Papers 14299, National Bureau of Economic Research, Inc.
  5. Aw, Bee Yan & Chen, Xiaomin & Roberts, Mark J., 2001. "Firm-level evidence on productivity differentials and turnover in Taiwanese manufacturing," Journal of Development Economics, Elsevier, vol. 66(1), pages 51-86, October.
  6. Juan Carlos Cordoba & Genevieve Verdier, 2005. "Lucas vs. Lucas: On Inequality and Growth," Macroeconomics 0511021, EconWPA.
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Cited by:
  1. Robert E. Lucas, Jr. & Benjamin Moll, 2011. "Knowledge Growth and the Allocation of Time," NBER Working Papers 17495, National Bureau of Economic Research, Inc.
  2. Erzo G.J. Luttmer, 2012. "Eventually, noise and imitation implies balanced growth," Working Papers 699, Federal Reserve Bank of Minneapolis.
  3. Davin Chor & Edwin L.-C. Lai, 2013. "Cumulative Innovation, Growth and Welfare-Improving Patent Policy," CESifo Working Paper Series 4407, CESifo Group Munich.
  4. Ufuk Akcigit & Murat Alp Celik & Jeremy Greenwood, 2013. "Buy, Keep or Sell: Economic Growth and the Market for Ideas," NBER Working Papers 19763, National Bureau of Economic Research, Inc.
  5. Jess Benhabib & Jesse Perla & Christopher Tonetti, 2012. "Catch-up and Fall-back through Innovation and Imitation," NBER Working Papers 18091, National Bureau of Economic Research, Inc.
  6. Edwin Lai, 2013. "Cumulative Innovation, Growth and Welfare-Improving Patent Policy," 2013 Meeting Papers 854, Society for Economic Dynamics.
  7. Fernando E. Alvarez & Francisco J. Buera & Robert E. Lucas, Jr., 2013. "Idea Flows, Economic Growth, and Trade," NBER Working Papers 19667, National Bureau of Economic Research, Inc.

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