IDEAS home Printed from https://ideas.repec.org/a/tpr/jeurec/v4y2006i1p37-74.html
   My bibliography  Save this article

Distance to Frontier, Selection, and Economic Growth

Author

Listed:
  • Daron Acemoglu

    (Massachusetts Institute of Technology.)

  • Philippe Aghion

    (Harvard University.)

  • Fabrizio Zilibotti

    (Institute for International Economic Studies.)

Abstract

We analyze an economy where firms undertake both innovation and adoption of technologies from the world technology frontier. The selection of high-skill managers and firms is more important for innovation than for adoption. As the economy approaches the frontier, selection becomes more important. Countries at early stages of development pursue an investment-based strategy, which relies on existing firms and managers to maximize investment but sacrifices selection. Closer to the world technology frontier, economies switch to an innovation-based strategy with short-term relationships, younger firms, less investment, and better selection of firms and managers. We show that relatively backward economies may switch out of the investment-based strategy too soon, so certain policies such as limits on product market competition or investment subsidies, which encourage the investment-based strategy, may be beneficial. However, these policies may have significant long-run costs because they make it more likely that a society will be trapped in the investment-based strategy and fail to converge to the world technology frontier. (JEL: O31, O33, O38, O40, L16) Copyright (c) 2006 by the European Economic Association.

Suggested Citation

  • Daron Acemoglu & Philippe Aghion & Fabrizio Zilibotti, 2006. "Distance to Frontier, Selection, and Economic Growth," Journal of the European Economic Association, MIT Press, vol. 4(1), pages 37-74, March.
  • Handle: RePEc:tpr:jeurec:v:4:y:2006:i:1:p:37-74
    as

    Download full text from publisher

    File URL: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1542-4774/issues
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Joseph Zeira, 1998. "Workers, Machines, and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1091-1117.
    2. Rachel Griffith & Stephen Redding & John Van Reenen, 2004. "Mapping the Two Faces of R&D: Productivity Growth in a Panel of OECD Industries," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 883-895, November.
    3. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
    4. Howitt, Peter & Mayer-Foulkes, David, 2005. "R&D, Implementation, and Stagnation: A Schumpeterian Theory of Convergence Clubs," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(1), pages 147-177, February.
    5. Acemoglu, Daron & Zilibotti, Fabrizio, 1997. "Was Prometheus Unbound by Chance? Risk, Diversification, and Growth," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 709-751, August.
    6. Hassler, John & Rodríguez Mora, José Vicente, 1998. "IQ, Social Mobility and Growth," CEPR Discussion Papers 1827, C.E.P.R. Discussion Papers.
    7. Tong, Jian & Xu, Chenggang, 2003. "Financial institutions and the wealth of nations: tales of development," Discussion Paper Series In Economics And Econometrics 0404, Economics Division, School of Social Sciences, University of Southampton.
    8. Brezis, Elise S & Krugman, Paul R & Tsiddon, Daniel, 1993. "Leapfrogging in International Competition: A Theory of Cycles in National Technological Leadership," American Economic Review, American Economic Association, vol. 83(5), pages 1211-1219, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Enrico Spolaore & Romain Wacziarg, 2009. "The Diffusion of Development," The Quarterly Journal of Economics, Oxford University Press, vol. 124(2), pages 469-529.
    2. Capolupo, Rosa, 2009. "The New Growth Theories and Their Empirics after Twenty Years," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 3, pages 1-72.
    3. Philippe Aghion & Peter Howitt & David Mayer-Foulkes, 2005. "The Effect of Financial Development on Convergence: Theory and Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 120(1), pages 173-222.
    4. Crafts, Nicholas & O’Rourke, Kevin Hjortshøj, 2014. "Twentieth Century Growth*This research has received funding from the European Research Council under the European Union’s Seventh Framework Programme (FP7/2007-2013) / ERC grant agreement no. 249546.," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 6, pages 263-346, Elsevier.
    5. Sadik, Jacques, 2008. "Technology adoption, convergence, and divergence," European Economic Review, Elsevier, vol. 52(2), pages 338-355, February.
    6. Howitt, Peter & Mayer-Foulkes, David, 2005. "R&D, Implementation, and Stagnation: A Schumpeterian Theory of Convergence Clubs," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(1), pages 147-177, February.
    7. William F. Maloney & Felipe Valencia Caicedo, 2017. "Engineering Growth: Innovative Capacity and Development in the Americas," CESifo Working Paper Series 6339, CESifo.
    8. Diego Comin & Ramana Nanda, 2019. "Financial Development and Technology Diffusion," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 67(2), pages 395-419, June.
    9. Henry van der Wiel & Harold Creusen & George van Leeuwen & Eugene Van der Pijll, 2012. "The Dutch Productivity Performance: Cross Your Border and Look Around," Chapters, in: Matilde Mas & Robert Stehrer (ed.), Industrial Productivity in Europe, chapter 14, Edward Elgar Publishing.
    10. Raddatz, Claudio, 2006. "Liquidity needs and vulnerability to financial underdevelopment," Journal of Financial Economics, Elsevier, vol. 80(3), pages 677-722, June.
    11. Pozzolo, Alberto Franco, 2004. "Endogenous Growth in Open Economies - A Survey of Major Results," Economics & Statistics Discussion Papers esdp04020, University of Molise, Dept. EGSeI.
    12. Arjan Lejour & Vladimir Solanic & Paul Tang, 2009. "EU Accession and Income Growth: An Empirical Approach," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 16(1), pages 127-144, May.
    13. Arjan Lejour & Vlado Solanic & Paul Tang, 2006. "EU accession and income growth: an empirical approach," CPB Discussion Paper 72, CPB Netherlands Bureau for Economic Policy Analysis.
    14. Philippe Aghion & Richard Blundell & Rachel Griffith & Peter Howitt & Susanne Prantl, 2009. "The Effects of Entry on Incumbent Innovation and Productivity," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 20-32, February.
    15. der Beek, Karine van, 2010. "The effects of political fragmentation on investments: A case study of watermill construction in medieval Ponthieu, France," Explorations in Economic History, Elsevier, vol. 47(4), pages 369-380, October.
    16. Lessmann, Christian & Seidel, André, 2017. "Regional inequality, convergence, and its determinants – A view from outer space," European Economic Review, Elsevier, vol. 92(C), pages 110-132.
    17. Camilla Mastromarco & Laura Serlenga & Yongcheol Shin, 2012. "Is Globalization Driving Efficiency? A Threshold Stochastic Frontier Panel Data Modeling Approach," Review of International Economics, Wiley Blackwell, vol. 20(3), pages 563-579, August.
    18. Jean Paul Azam & Robert Bates & Bruno Biais, 2009. "Political Predation And Economic Development," Economics and Politics, Wiley Blackwell, vol. 21(2), pages 255-277, July.
    19. Berdugo, Binyamin & Hadad, Sharon, 2008. "How Do Firing Costs Affect Innovation and Growth when Workers' Ability is Unknown? – Employment Protection as a Burden on a Firm's Screening Process," MPRA Paper 11410, University Library of Munich, Germany.
    20. Kourtellos, Andros & Tan, Chih Ming & Zhang, Xiaobo, 2007. "Is the relationship between aid and economic growth nonlinear?," Journal of Macroeconomics, Elsevier, vol. 29(3), pages 515-540, September.

    More about this item

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tpr:jeurec:v:4:y:2006:i:1:p:37-74. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: http://www.mitpressjournals.org/jeea .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ann Olson (email available below). General contact details of provider: http://www.mitpressjournals.org/jeea .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.