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Firm Dynamics Support the Importance of the Embodied Question

  • Alain Gabler
  • Omar Licandro

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 European University Institute in its series Economics Working Papers with number ECO2009/35.

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Date of creation: 2009
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Handle: RePEc:eui:euiwps:eco2009/35
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  1. Erzo G. J. Luttmer, 2007. "Selection, Growth, and the Size Distribution of Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 122(3), pages 1103-1144.
  2. Cummins, Jason G & Violante, Giovanni L, 2002. "Investment-Specific Technical Change in the US (1947-2000): Measurement and Macroeconomic Consequences," CEPR Discussion Papers 3584, C.E.P.R. Discussion Papers.
  3. repec:ucp:bknber:9780226304557 is not listed on IDEAS
  4. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
  5. 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.
  6. Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," Working papers 527, Massachusetts Institute of Technology (MIT), Department of Economics.
  7. 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.
  8. Michael Gort & Jeremy Greenwood & Peter Rupert, 1998. "Measuring the rate of technological progress in structures," Working Paper 9806, Federal Reserve Bank of Cleveland.
  9. BOUCEKKINE, Raouf & DEL RIO, Fernando & LICANDRO, Omar, . "Embodied technological change, learning-by-doint and the productivity slowdown," CORE Discussion Papers RP 1629, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  10. Paul Gomme & Peter Rupert, 2005. "Theory, measurement, and calibration of macroeconomic models," Working Paper 0505, Federal Reserve Bank of Cleveland.
  11. Robert J. Gordon, 1990. "The Measurement of Durable Goods Prices," NBER Books, National Bureau of Economic Research, Inc, number gord90-1.
  12. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-50, September.
  13. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  14. Hsieh, Chang-Tai, 2001. "Endogenous growth and obsolescence," Journal of Development Economics, Elsevier, vol. 66(1), pages 153-171, October.
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