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Firm Dynamics Support the Importance of the Embodied Question

  • Gabler, Alain
  • Licandro, Omar

This paper contributes to the literature on both embodied technical progress and firm dynamics, by formulating an endogenous growth model where selection and imitation play a fundamental role in helping capital good producers to learn about the productivity of technologies embodied in new plants. By calibrating the model to some key aggregates particularly relevant for the embodied capital literature, among them the growth rate of the relative investment price, the model quantitatively replicates the main facts associated to firm dynamics, such as the entry rate and the tail index of the establishment size distribution. In line with the previous literature, it also predicts a contribution to productivity growth of embodied technical progress and selection of around 60%.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7486.

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Date of creation: Oct 2009
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Handle: RePEc:cpr:ceprdp:7486
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  1. Raouf BOUCEKKINE & Fernando DEL RIO & Omar LICANDRO, 2002. "Embodied technological change learning-by-doing and the productivity slowdown," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2002028, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  2. Robert J. Gordon, 1990. "The Measurement of Durable Goods Prices," NBER Books, National Bureau of Economic Research, Inc, number gord90-1.
  3. Michael Gort & Jeremy Greenwood & Peter Rupert, 1998. "Measuring the rate of technological progress in structures," Working Paper 9806, Federal Reserve Bank of Cleveland.
  4. Jeffrey Campbell, 1998. "Entry, Exit, Embodied Technology, and Business Cycles," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(2), pages 371-408, April.
  5. Paul Gomme & Peter Rupert, 2005. "Theory, measurement, and calibration of macroeconomic models," Working Paper 0505, Federal Reserve Bank of Cleveland.
  6. Erzo G. J. Luttmer, 2007. "Selection, Growth, and the Size Distribution of Firms," The Quarterly Journal of Economics, MIT Press, vol. 122(3), pages 1103-1144, 08.
  7. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
  8. Jason G. Cummins & Giovanni L. Violante, 2002. "Investment-specific technical change in the US (1947-2000): measurement and macroeconomics consequences," Finance and Economics Discussion Series 2002-10, Board of Governors of the Federal Reserve System (U.S.).
  9. Gordon, Robert J., 1990. "The Measurement of Durable Goods Prices," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226304557, May.
  10. Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," UWO Department of Economics Working Papers 8904, University of Western Ontario, Department of Economics.
  11. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  12. Hsieh, Chang-Tai, 2001. "Endogenous growth and obsolescence," Journal of Development Economics, Elsevier, vol. 66(1), pages 153-171, October.
  13. Greenwood, Jeremy & Hercowitz, Zvi & Krusell, Per, 1997. "Long-Run Implications of Investment-Specific Technological Change," American Economic Review, American Economic Association, vol. 87(3), pages 342-62, June.
  14. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  15. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-50, September.
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