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The world’s productivity distribution and optimal knowledge absorption

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  • Orlando Gomes

Abstract

An optimal growth model is devised and subject to dynamic analysis. The model is a standard intertemporal utility maximization framework, with a one-dimensional constraint characterizing the pace of productivity growth. In this setting, knowledge acquisition depends not only on the investment in the adoption of existing technologies, but also on the pre-determined shape of the world’s productivity distribution. The configuration of the distribution will determine the probability of successful imitation and, therefore, the extent in which the economy might approach the world’s technology frontier. The dynamic analysis points to the formation of a saddle-path stable equilibrium. The type of distribution is decisive in defining the exact location of the stable trajectory and of the equilibrium point.

Suggested Citation

  • Orlando Gomes, 2024. "The world’s productivity distribution and optimal knowledge absorption," Economics and Business Letters, Oviedo University Press, vol. 13(2), pages 91-103.
    • Handle: RePEc:ove:journl:aid:19998
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    File URL: https://reunido.uniovi.es/index.php/EBL/article/view/19998
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    1. Jesse Perla & Christopher Tonetti & Michael E. Waugh, 2021. "Equilibrium Technology Diffusion, Trade, and Growth," American Economic Review, American Economic Association, vol. 111(1), pages 73-128, January.
    2. , & Lorenz, Jan & ,, 2016. "Innovation vs. imitation and the evolution of productivity distributions," Theoretical Economics, Econometric Society, vol. 11(3), September.
    3. Jess Benhabib & Jesse Perla & Christopher Tonetti, 2021. "Reconciling Models of Diffusion and Innovation: A Theory of the Productivity Distribution and Technology Frontier," Econometrica, Econometric Society, vol. 89(5), pages 2261-2301, September.
    4. Felbermayr, Gabriel J. & Toubal, Farid, 2010. "Cultural proximity and trade," European Economic Review, Elsevier, vol. 54(2), pages 279-293, February.
    5. Gomes, Orlando, 2024. "Optimal planning of technological options and productivity distribution dynamics," Economic Modelling, Elsevier, vol. 130(C).
    6. Michael König & Kjetil Storesletten & Zheng Song & Fabrizio Zilibotti, 2022. "From Imitation to Innovation: Where Is All That Chinese R&D Going?," Econometrica, Econometric Society, vol. 90(4), pages 1615-1654, July.
    7. Jess Benhabib & Jesse Perla & Christopher Tonetti, 2014. "Catch-up and fall-back through innovation and imitation," Journal of Economic Growth, Springer, vol. 19(1), pages 1-35, March.
    8. Jesse Perla & Christopher Tonetti, 2014. "Equilibrium Imitation and Growth," Journal of Political Economy, University of Chicago Press, vol. 122(1), pages 52-76.
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