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Equilibrium Imitation and Growth

  • Jesse Perla
  • Christopher Tonetti

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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File URL: http://www.jstor.org/stable/pdfplus/10.1086/674362
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File URL: http://www.jstor.org/stable/full/10.1086/674362
Download Restriction: Access to the online full text or PDF requires a subscription.

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Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 122 (2014)
Issue (Month): 1 ()
Pages: 52 - 76

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Handle: RePEc:ucp:jpolec:doi:10.1086/674362
Contact details of provider: Web page: http://www.journals.uchicago.edu/JPE/

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  1. Poschke, Markus, 2007. "Employment Protection, Firm Selection, and Growth," IZA Discussion Papers 3164, Institute for the Study of Labor (IZA).
  2. Benjamin Moll & Robert E. Lucas, 2011. "Knowledge Growth and the Allocation of Time," 2011 Meeting Papers 1030, Society for Economic Dynamics.
  3. König, Michael & Lorenz, Jan & Zilibotti, Fabrizio, 2012. "Innovation vs imitation and the evolution of productivity distributions," CEPR Discussion Papers 8843, C.E.P.R. Discussion Papers.
  4. Jess Benhabib & Mark M. Spiegel, 2002. "Human capital and technology diffusion," Working Paper Series 2003-02, Federal Reserve Bank of San Francisco.
  5. Juan Carlos Cordoba & Genevieve Verdier, 2005. "Lucas vs. Lucas: On Inequality and Growth," Macroeconomics 0511021, EconWPA.
  6. Xavier Gabaix, 2009. "Power Laws in Economics and Finance," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 255-294, 05.
  7. 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.
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