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Endogenous Growth through Selection and Imitation

Author

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  • Alain Gabler
  • Omar Licandro

Abstract

A simple dynamic general equilibrium model is set up in which firms face idiosyncratic productivity shocks. Firms whose productivity has fallen too low exit, and entrants try to imitate the best practice of existing firms, so that the expected productivity of entering firms is a function of current average productivity. Because of the resulting selection and imitation process, aggregate productivity grows endogenously. When calibrated to U.S. data, the model suggests that around one-fifth of productivity growth is due to such a selection and imitation effect.

Suggested Citation

  • Alain Gabler & Omar Licandro, 2007. "Endogenous Growth through Selection and Imitation," Economics Working Papers ECO2007/26, European University Institute.
    • Handle: RePEc:eui:euiwps:eco2007/26
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Benedetti Fasil, Cristiana & Borota, Teodora, 2013. "World trade patterns and prices: The role of productivity and quality heterogeneity," Journal of International Economics, Elsevier, vol. 91(1), pages 68-81.
    2. Pedro Gil & Fernanda Figueiredo, 2013. "Firm size distribution under horizontal and vertical innovation," Journal of Evolutionary Economics, Springer, vol. 23(1), pages 129-161, January.
    3. Poschke, Markus, 2013. "Who becomes an entrepreneur? Labor market prospects and occupational choice," Journal of Economic Dynamics and Control, Elsevier, vol. 37(3), pages 693-710.
    4. Schröder, Philipp J.H. & Sørensen, Allan, 2012. "Firm exit, technological progress and trade," European Economic Review, Elsevier, vol. 56(3), pages 579-591.
    5. Cristiana Benedetti Fasil, 2009. "Product and Process Innovation in a Growth Model of Firm Selection," Economics Working Papers ECO2009/30, European University Institute.
    6. Markus Poschke & Alain Gabler, 2011. "Growth through Experimentation," 2011 Meeting Papers 643, Society for Economic Dynamics.
    7. Alain Gabler & Markus Poschke, 2013. "Experimentation by Firms, Distortions, and Aggregate Productivity," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 26-38, January.
    8. Sarah Stolting, 2009. "International Trade and Growth: The Impact of Seletion and Imitation," Economics Working Papers ECO2009/21, European University Institute.

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    More about this item

    Keywords

    endogenous growth; selection; imitation; firm entry and exit;
    All these keywords.

    JEL classification:

    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary; Modern Monetary Theory;
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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