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An Empirical Model of Growth Through Product Innovation

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  • Rasmus Lentz

    (University of Wisconsin-Madison)

  • Dale T. Mortensen

    (Northwestern University)

Abstract

Productivity dispersion across firms is large and persistent, and worker reallocation among firms is an important source of productivity growth. The purpose of the paper is to estimate the structure of an equilibrium model of growth through innovation that explains these facts. The model is a modified version of the Schumpeterian theory of firm evolution and growth developed by Klette and Kortum (2004). The data set is a panel of Danish firms than includes information on value added, employment, and wages. The model's fit is good and the structural parameter estimates have interesting implications for the aggregate growth rate and the contribution of worker reallocation to it.

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File URL: http://www.econ.ku.dk/cam/wp0910/wp0406/2005-13.pdf/
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Bibliographic Info

Paper provided by University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics in its series CAM Working Papers with number 2005-13.

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Length: 39 pages
Date of creation: Jul 2005
Date of revision:
Handle: RePEc:kud:kuieca:2005_13

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Fax: +45 35 32 30 00
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Web page: http://www.econ.ku.dk/CAM/
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Related research

Keywords: labor productivity growth; worker reallocation; firm dynamics; firm panel data estimation;

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References

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  1. Frederiksen, Anders & Westergaard-Nielsen, Niels, 2002. "Where did they go ?," CLS Working Papers 01-11, University of Aarhus, Aarhus School of Business, Centre for Labour Market and Social Research.
  2. Mark Doms & Eric J. Bartelsman, 2000. "Understanding Productivity: Lessons from Longitudinal Microdata," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 569-594, September.
  3. Bent Jesper Christensen & Rasmus Lentz & Dale T. Mortensen & George R. Neumann & Axel Werwatz, 2003. "On the Job Search and the Wage Distribution," CAM Working Papers 2004-09, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
  4. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, January.
  5. Tor Jakob Klette & Samuel Kortum, 2004. "Innovating Firms and Aggregate Innovation," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 986-1018, October.
  6. John Haltiwanger & Martin N Baily & Eric J Bartelsman, 1994. "Downsizing and Productivity Growth: Myth or Reality?," Working Papers 94-4, Center for Economic Studies, U.S. Census Bureau.
  7. Wright, Mark, 2004. "Firm Size Dynamics in the Aggregate Economy," Santa Cruz Department of Economics, Working Paper Series qt4rs4202s, Department of Economics, UC Santa Cruz.
  8. Lucia Foster & John Haltiwanger & C.J. Krizan, 1998. "Aggregate Productivity Growth: Lessons from Microeconomic Evidence," NBER Working Papers 6803, National Bureau of Economic Research, Inc.
  9. Martin Browning & Mette Ejrn�s & Javier Alvarez, 2010. "Modelling Income Processes with Lots of Heterogeneity," Review of Economic Studies, Oxford University Press, vol. 77(4), pages 1353-1381.
  10. Altonji, Joseph G & Segal, Lewis M, 1996. "Small-Sample Bias in GMM Estimation of Covariance Structures," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(3), pages 353-66, July.
  11. Tor Jakob Klette & Zvi Griliches, 1994. "The Inconsistency of Common Scales Estimators when Output Prices are Unobserved and Endogenous," Discussion Papers 127, Research Department of Statistics Norway.
  12. Rasmus Lentz & Dale T. Mortensen, 2005. "Productivity Growth And Worker Reallocation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(3), pages 731-749, 08.
  13. Joel L. Horowitz, 1998. "Bootstrap Methods for Covariance Structures," Journal of Human Resources, University of Wisconsin Press, vol. 33(1), pages 39-61.
  14. Joel L. Horowitz, 1996. "Bootstrap Methods For Covariance Structures," Econometrics 9610003, EconWPA.
  15. Gourieroux, C. & Monfort, A. & Renault, E., 1992. "Indirect Inference," Papers 92.279, Toulouse - GREMAQ.
  16. Bruce C. Fallick & Charles A. Fleischman, 2001. "The importance of employer-to-employer flows in the U.S. labor market," Finance and Economics Discussion Series 2001-18, Board of Governors of the Federal Reserve System (U.S.).
  17. Dale T. Mortensen & Rasmus Lentz, 2004. "Productivity Differences and Firm Size," 2004 Meeting Papers 60, Society for Economic Dynamics.
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