Eventually, noise and imitation implies balanced growth
AbstractThis paper adds imitation by incumbent firms, and not just by new entrants, to the model of selection and growth developed in Luttmer . Noisy firm-level innovation and imitation give rise to a long-run growth rate that exceeds the average rate at which individual firms innovate. It can be shown, in simple examples, that the economy converges to a long-run balanced growth path from compactly supported initial productivity distributions. The right tail of the stationary distribution of de-trended productivity is approximately Pareto. The tail index of this distribution depends on the rate at which incumbents are able to imitate only indirectly, through general equilibrium effects of this parameter on the equilibrium growth rate.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Minneapolis in its series Working Papers with number 699.
Date of creation: 2012
Date of revision:
Other versions of this item:
- Erzo Luttmer, 2013. "Eventually, Noise and Imitation Implies Balanced Growth," 2013 Meeting Papers 91, Society for Economic Dynamics.
- NEP-ALL-2012-09-16 (All new papers)
- NEP-DGE-2012-09-16 (Dynamic General Equilibrium)
- NEP-FDG-2012-09-16 (Financial Development & Growth)
- NEP-INO-2012-09-16 (Innovation)
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