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An Empirical Model of Growth Through Product Innovation

  • Rasmus Lentz

    (University of Wisconsin-Madison)

  • Dale T. Mortensen

    (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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File URL: http://www.econ.ku.dk/cam/wp0910/wp0406/2005-13.pdf/
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Paper provided by University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics in its series CAM Working Papers with number 2005-13.

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Length: 39 pages
Date of creation: Jul 2005
Date of revision:
Handle: RePEc:kud:kuieca:2005_13
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Phone: (45) 35 32 30 74
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Web page: http://www.econ.ku.dk/CAM/
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  1. Baily, Martin Neil & Bartelsman, Eric J & Haltiwanger, John, 1996. " Downsizing and Productivity Growth: Myth or Reality?," Small Business Economics, Springer, vol. 8(4), pages 259-78, August.
  2. Martin Browning & Mette Ejrnaes, 2006. "Modelling income processes with lots of heterogeneity," Economics Series Working Papers 285, University of Oxford, Department of Economics.
  3. Bent Jesper Christensen & Rasmus Lentz & Dale T. Mortensen & George R. Neumann & Axel Werwatz, 2005. "On-the-Job Search and the Wage Distribution," Journal of Labor Economics, University of Chicago Press, vol. 23(1), pages 31-58, January.
  4. 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.
  5. Altonji, Joseph G & Segal, Lewis M, 1996. "Small-Sample Bias in GMM Estimation of Covariance Structures," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(3), pages 353-66, July.
  6. Gourieroux, C. & Monfort, A. & Renault, E., 1992. "Indirect Inference," Papers 92.279, Toulouse - GREMAQ.
  7. Mark L.J. Wright & Esteban Rossi-Hansberg, 2004. "Firm Size Dynamics in the Aggregate Economy," 2004 Meeting Papers 878, Society for Economic Dynamics.
  8. Joel L. Horowitz, 1998. "Bootstrap Methods for Covariance Structures," Journal of Human Resources, University of Wisconsin Press, vol. 33(1), pages 39-61.
  9. Klette, Tor Jakob & Kortum, Samuel, 2002. "Innovating Firms and Aggregate Innovation," Memorandum 02/2002, Oslo University, Department of Economics.
  10. 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.
  11. 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.).
  12. 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.
  13. 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.
  14. 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.
  15. Joel L. Horowitz, 1996. "Bootstrap Methods For Covariance Structures," Econometrics 9610003, EconWPA.
  16. 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.).
  17. Dale T. Mortensen & Rasmus Lentz, 2004. "Productivity Differences and Firm Size," 2004 Meeting Papers 60, Society for Economic Dynamics.
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