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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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Bibliographic Info

Paper provided by New York University, Leonard N. Stern School of Business, Department of Economics in its series Working Papers with number 12-03.

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Date of creation: 2012
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Handle: RePEc:ste:nystbu:12-03

Contact details of provider:
Postal: New York University, Leonard N. Stern School of Business, Department of Economics, 44 West 4th Street, New York, NY 10012-1126
Phone: (212) 998-0860
Fax: (212) 995-4218
Web page: http://w4.stern.nyu.edu/economics/
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References

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  1. Juan Carlos Cordoba & Genevieve Verdier, 2005. "Lucas vs. Lucas: On Inequality and Growth," Macroeconomics 0511021, EconWPA.
  2. Robert E. Lucas, Jr. & Benjamin Moll, 2011. "Knowledge Growth and the Allocation of Time," NBER Working Papers 17495, National Bureau of Economic Research, Inc.
  3. 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.
  4. Benhabib, Jess & Spiegel, Mark M., 2005. "Human Capital and Technology Diffusion," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 13, pages 935-966 Elsevier.
  5. Markus Poschke, 2007. "Employment protection, firm selection, and growth," 2007 Meeting Papers 389, Society for Economic Dynamics.
  6. Xavier Gabaix, 2009. "Power Laws in Economics and Finance," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 255-294, 05.
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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," NBER Working Papers 19763, National Bureau of Economic Research, Inc.
  2. 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.
  3. Edwin Lai, 2013. "Cumulative Innovation, Growth and Welfare-Improving Patent Policy," 2013 Meeting Papers 854, Society for Economic Dynamics.
  4. Robert E. Lucas, Jr. & Benjamin Moll, 2011. "Knowledge Growth and the Allocation of Time," NBER Working Papers 17495, National Bureau of Economic Research, Inc.
  5. 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.
  6. Erzo G.J. Luttmer, 2012. "Eventually, noise and imitation implies balanced growth," Working Papers 699, Federal Reserve Bank of Minneapolis.
  7. Davin Chor & Edwin L.-C. Lai, 2013. "Cumulative Innovation, Growth and Welfare-Improving Patent Policy," CESifo Working Paper Series 4407, CESifo Group Munich.

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