Firm Learning and Growth
We study the implications of introducing learning (Jovanovic, 1982) in a standard monopolistically competitive environment with firm productivity heterogeneity. Our setup predicts that firm growth rates decrease with age, holding size constant, and decrease with size, holding age constant, a fact that models focusing on idiosyncratic productivity shocks have difficulty matching. We characterize the planner's problem and show that relative quantities between any two firms are the same in both planner's allocation and the decentralized economy. As a result, any inefficiency is driven by a discrepancy in the firm entry and exit thresholds. We calibrate the model using Colombian plant-level data and demonstrate how policies directly affecting firm entry and exit can be welfare enhancing. In particular, age-dependent subsidies allow young firms to avoid early exit and thus benefit consumers through access to a larger number of varieties. (Copyright: Elsevier)
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- Swati Dhingra & John Morrow, 2012.
"The Impact of Integration on Productivity and Welfare Distortions Under Monopolistic Competition,"
FIW Working Paper series
- Swati Dhingra & John Morrow, 2012. "The Impact of Integration on Productivity and Welfare Distortions Under Monopolistic Competition," CEP Discussion Papers dp1130, Centre for Economic Performance, LSE.
- Jaap H. Abbring & Jeffrey R. Campbell, 2003. "A Structural Empirical Model of Firm Growth, Learning, and Survival," NBER Working Papers 9712, National Bureau of Economic Research, Inc.
- Abbring, Jaap H. & Campbell, Jeffrey R., 2003. "A Structural Empirical Model of Firm Growth, Learning, and Survival," IZA Discussion Papers 781, Institute for the Study of Labor (IZA).
- Jaap H. Abbring & Jeffrey R. Campbell, 2003. "A structural empirical model of firm growth, learning, and survival," Working Paper Series WP-03-11, Federal Reserve Bank of Chicago.
- John C. Haltiwanger & Ron S. Jarmin & Javier Miranda, 2010. "Who Creates Jobs? Small vs. Large vs. Young," NBER Working Papers 16300, National Bureau of Economic Research, Inc.
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