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An Empirical Model of Growth Through Product Innovation

  • Lentz, Rasmus

    ()

    (Boston University)

  • Mortensen, Dale T.

    ()

    (Northwestern University)

Productivity dispersion across firms is large and persistent, and worker reallocation among firms is an important source of productivity growth. The purpose of the paper is to estimate the structure of an equilibrium model of growth through innovation that explains these facts. The model is a modified version of the Schumpeterian theory of firm evolution and growth developed by Klette and Kortum (2004). The data set is a panel of Danish firms than includes information on value added, employment, and wages. The model's fit is good and the structural parameter estimates have interesting implications for the aggregate growth rate and the contribution of worker reallocation to it.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1685.

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Length: 45 pages
Date of creation: Jul 2005
Date of revision:
Handle: RePEc:iza:izadps:dp1685
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  1. Lucia Foster & John Haltiwanger & C.J. Krizan, 1998. "Aggregate Productivity Growth: Lessons from Microeconomic Evidence," NBER Working Papers 6803, National Bureau of Economic Research, Inc.
  2. Bruce C. Fallick & Charles A. Fleischman, 2001. "The importance of employer-to-employer flows in the U.S. labor market," Finance and Economics Discussion Series 2001-18, Board of Governors of the Federal Reserve System (U.S.).
  3. Martin Browning & Mette Ejrn�s & Javier Alvarez, 2010. "Modelling Income Processes with Lots of Heterogeneity," Review of Economic Studies, Oxford University Press, vol. 77(4), pages 1353-1381.
  4. Tor Jakob Klette & Samuel Kortum, 2004. "Innovating Firms and Aggregate Innovation," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 986-1018, October.
  5. Eric J. Bartelsman & Mark Doms, 2000. "Understanding productivity: lessons from longitudinal microdata," Finance and Economics Discussion Series 2000-19, Board of Governors of the Federal Reserve System (U.S.).
  6. Joseph G. Altonji & Lewis M. Segal, 1994. "Small sample bias in GMM estimation of covariance structures," Working Paper Series, Macroeconomic Issues 94-8, Federal Reserve Bank of Chicago.
  7. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, June.
  8. Rasmus Lentz & Dale T. Mortensen, 2005. "Productivity Growth And Worker Reallocation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(3), pages 731-749, 08.
  9. Anders Frederiksen & Niels Westergaard-Nielsen, 2002. "Where did they go?," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 D3-2, International Conferences on Panel Data.
  10. Martin Neil Baily & Eric J. Bartelsman & John Haltiwanger, 1994. "Downsizing and Productivity Growth: Myth or Reality?," NBER Working Papers 4741, National Bureau of Economic Research, Inc.
  11. Tor Jakob Klette & Zvi Griliches, 1992. "The Inconsistency of Common Scale Estimators When Output Prices Are Unobserved and Engogenous," NBER Working Papers 4026, National Bureau of Economic Research, Inc.
  12. Mark L.J. Wright & Esteban Rossi-Hansberg, 2004. "Firm Size Dynamics in the Aggregate Economy," 2004 Meeting Papers 878, Society for Economic Dynamics.
  13. Bent Jesper Christensen & Rasmus Lentz & Dale T. Mortensen & George R. Neumann & Axel Werwatz, 2003. "On the Job Search and the Wage Distribution," CAM Working Papers 2004-09, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
  14. Gourieroux, C & Monfort, A & Renault, E, 1993. "Indirect Inference," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(S), pages S85-118, Suppl. De.
  15. Dale T. Mortensen & Rasmus Lentz, 2004. "Productivity Differences and Firm Size," 2004 Meeting Papers 60, Society for Economic Dynamics.
  16. Joel L. Horowitz, 1996. "Bootstrap Methods For Covariance Structures," Econometrics 9610003, EconWPA.
  17. Joel L. Horowitz, 1998. "Bootstrap Methods for Covariance Structures," Journal of Human Resources, University of Wisconsin Press, vol. 33(1), pages 39-61.
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