The World Distribution of Productivity: Country TFP Choice in a Nelson-Phelps Economy
AbstractThis paper builds a theory of the shape of the distribution of total-factor productivity (TFP) across countries. The distribution of productivity across countries is arguably twin-peaked in the data, and the proposed theory presents conditions under which twin-peakedness is an equilibrium outcome. We construct a stochastic dynamic general equilibrium model where world growth is endogenous and driven by investments in TFP. All countries invest in TFP in order to increase their productivity, and each country internalizes the dynamic effects of its own TFP accumulation, i.e., through its own investment. In addition, there are technology spillovers across countries, modeled according to the Nelson-Phelps specification. We find that even under the assumption that all countries have identical technologies for TFP accumulation, the world distribution of TFP across countries can be asymmetric; it is twin-peaked, or bimodal. More specifically, twin-peaked world distributions of TFP arise if the catch-up term in the Nelson-Phelps equation is sufficiently weak. If, on the other hand, technological catch-up is important, the world distribution of TFP is unimodal.
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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2008 Meeting Papers with number 176.
Date of creation: 2008
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Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
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Other versions of this item:
- Färnstrand Damsgaard, Erika & Krusell, Per, 2010. "The World Distribution of Productivity: Country TFP Choice in a Nelson-Phelps Economy," Working Paper Series 850, Research Institute of Industrial Economics.
- Erika Färnstrand Damsgaard & Per Krusell, 2010. "The World Distribution of Productivity: Country TFP Choice in a Nelson-Phelps Economy," NBER Working Papers 16375, National Bureau of Economic Research, Inc.
- Färnstrand Damsgaard, Erika & Krusell, Per, 2010. "The World Distribution of Productivity: Country TFP Choice in a Nelson-Phelps Economy," CEPR Discussion Papers 8022, C.E.P.R. Discussion Papers.
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
- O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
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