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Innovation, Reallocation and Growth

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  • William Kerr

    (Harvard University)

  • Ufuk Akcigit

    (University of Pennsylvania)

  • Nicholas Bloom

    (Stanford University)

  • Daron Acemoglu

    (Massachusetts Institute of Technology)

Abstract

We build a micro-founded model with endogenous firm innovation and growth. This enables us to examine the forces jointly driving innovation, productivity and reallocation. We estimate this using simulated methods of moments on detailed US Census micro data on output, R&D and patenting, obtaining a good fit to the micro-data. We also validate our model by showing a good fit between the predicted impact for R&D tax credits and skilled labor supply policies in our model to the actual data on previous episodes of these policies. Finally, we run a number of simulations on common industrial support policy. We find that a general entry subsidy increases growth rates by about 0.2%, but an R&D tax credit targeted at incumbent firms increases growth by almost 0.5%. In contrast, subsidizing fixed-costs of production helps to support failing incumbents, reducing entry by more innovative firms, and lowering growth by over 0.4%. This highlights the importance of evaluating the impact of industrial policies on both incumbents and potential entrants in a general equilibrium model.

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2012 Meeting Papers with number 1137.

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Date of creation: 2012
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Handle: RePEc:red:sed012:1137

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Blog mentions

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  1. Innovation, réallocation et croissance
    by ? in D'un champ l'autre on 2013-11-29 22:20:00
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Cited by:
  1. Ufuk Akcigit & Murat Alp Celik & Jeremy Greenwood, 2013. "Buy, Keep or Sell: Economic Growth and the Market for Ideas," Economie d'Avant Garde Research Reports 21, Economie d'Avant Garde.
  2. Can Tian, 2012. "Riskiness Choice and Endogenous Productivity Dispersion over the Business Cycle," PIER Working Paper Archive 12-025, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  3. Leonid Kogan & Dimitris Papanikolaou & Amit Seru & Noah Stoffman, 2012. "Technological Innovation, Resource Allocation, and Growth," NBER Working Papers 17769, National Bureau of Economic Research, Inc.
  4. Philippe Aghion & Ufuk Akcigit & Peter Brown, 2013. "What Do We Learn From Schumpeterian Growth Theory?," PIER Working Paper Archive 13-026, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  5. König, Michael & Liu, Xiaodong & Zenou, Yves, 2014. "R&D Networks: Theory, Empirics and Policy Implications," CEPR Discussion Papers 9872, C.E.P.R. Discussion Papers.
  6. Ufuk Akcigit & William R. Kerr, 2010. "Growth Through Heterogeneous Innovations," NBER Working Papers 16443, National Bureau of Economic Research, Inc.
  7. Lopez-Garcia, Paloma & di Mauro, Filippo & Benatti, Nicola & Angeloni, Chiara & Altomonte, Carlo & Bugamelli, Matteo & D’Aurizio, Leandro & Navaretti, Giorgio Barba & Forlani, Emanuele & Rossetti, S, 2014. "Micro-based evidence of EU competitiveness: the CompNet database," Working Paper Series 1634, European Central Bank.

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