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An Empirical Model of Growth Through Product Innovation

  • Rasmus Lentz
  • Dale T. Mortensen

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.nber.org/papers/w11546.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11546.

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Date of creation: Aug 2005
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Publication status: published as Lentz, Rasmus and Dale T. Mortensen. “An Empirical Model of Growth through Product Innovation.” Econometrica 76, 6 (November 2008): 1317-73.
Handle: RePEc:nbr:nberwo:11546
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  1. Dale T. Mortensen & Rasmus Lentz, 2004. "Productivity Differences and Firm Size," 2004 Meeting Papers 60, Society for Economic Dynamics.
  2. Klette, Tor Jakob & Kortum, Samuel, 2002. "Innovating Firms and Aggregate Innovation," Memorandum 02/2002, Oslo University, Department of Economics.
  3. 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.
  4. 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, March.
  5. Frederiksen, Anders & Westergaard-Nielsen, Niels, 2002. "Where did they go ?," CLS Working Papers 01-11, University of Aarhus, Aarhus School of Business, Centre for Labour Market and Social Research.
  6. 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.
  7. 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.
  8. Christensen, Bent Jesper & Mortensen, Dale & Neumann, George R. & Werwatz, Axel, 2000. "On the job search and the wage distribution," SFB 373 Discussion Papers 2000,108, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  9. Martin Browning & Mette Ejrnaes, 2006. "Modelling income processes with lots of heterogeneity," Economics Series Working Papers 285, University of Oxford, Department of Economics.
  10. Tor Jakob Klette & Zvi Griliches, 1994. "The Inconsistency of Common Scales Estimators when Output Prices are Unobserved and Endogenous," Discussion Papers 127, Statistics Norway, Research Department.
  11. Esteban Rossi-Hansberg & Mark L.J. Wright, 2005. "Firm Size Dynamics in the Aggregate Economy," NBER Working Papers 11261, National Bureau of Economic Research, Inc.
  12. John Haltiwanger & C J Krizan & Lucia Foster, 1998. "Aggregate Productivity Growth: Lessons From Microeconomic Evidence," Working Papers 98-12, Center for Economic Studies, U.S. Census Bureau.
  13. 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.).
  14. Gourieroux, C. & Monfort, A. & Renault, E., 1992. "Indirect Inference," Papers 92.279, Toulouse - GREMAQ.
  15. 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.).
  16. Joel L. Horowitz, 1998. "Bootstrap Methods for Covariance Structures," Journal of Human Resources, University of Wisconsin Press, vol. 33(1), pages 39-61.
  17. Joel L. Horowitz, 1996. "Bootstrap Methods For Covariance Structures," Econometrics 9610003, EconWPA.
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