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Firm Heterogeneity, Technological Adoption, and Urbanization: Theory and Measurement

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  • Alex Chernoff

Abstract

This paper develops a model of firm heterogeneity, technological adoption, and urbanization. In the model, welfare is measured by household real income, and urbanization is measured by population density. I use the model to derive statistics that measure the effect of a new technology on productivity, welfare, and urbanization. The empirical application of the paper estimates these effects using nineteenth-century firmlevel data on mechanical steam power in the Canadian manufacturing sector, and townshiplevel population data. The results indicate that the introduction of steam power increased productivity by 22.8 percent, and welfare by 6.0 percent. By comparing the model predicted change in urbanization to observed population density growth, I find that the introduction of mechanical steam power accounts for approximately 6.2 percent of the observed variation in urbanization during this period.

Suggested Citation

  • Alex Chernoff, 2017. "Firm Heterogeneity, Technological Adoption, and Urbanization: Theory and Measurement," Staff Working Papers 17-27, Bank of Canada.
  • Handle: RePEc:bca:bocawp:17-27
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    More about this item

    Keywords

    Economic models; Productivity; Regional economic developments;
    All these keywords.

    JEL classification:

    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • N61 - Economic History - - Manufacturing and Construction - - - U.S.; Canada: Pre-1913

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