Reconciling Models of Diffusion and Innovation: A Theory of the Productivity Distribution and Technology Frontier
We study how innovation and technology diffusion interact to endogenously determine the productivity distribution and generate aggregate growth. We model firms that choose to innovate, adopt technology, or produce with their existing technology. Costly adoption creates a spread between the best and worst technologies concurrently used to produce similar goods. The balance of adoption and innovation determines the shape of the distribution; innovation stretches the distribution, while adoption compresses it. Whether and how innovation and diffusion contribute to aggregate growth depends on the support of the productivity distribution. With finite support, the aggregate growth rate cannot exceed the maximum growth rate of innovators. Infinite support allows for “latent growth”: extra growth from initial conditions or auxiliary stochastic processes. While innovation drives long-run growth, changes in the adoption process can influence growth by affecting innovation incentives, either directly, through licensing excludable technologies, or indirectly, via the option value of adoption.
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|Date of creation:||Jan 2017|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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- Mike Waugh & Christopher Tonetti & Jesse Perla, 2013.
"Equilibrium Technology Diffusion, Trade, and Growth,"
2013 Meeting Papers
484, Society for Economic Dynamics.
- Jesse Perla & Christopher Tonetti & Michael E. Waugh, 2015. "Equilibrium Technology Diffusion, Trade, and Growth," NBER Working Papers 20881, National Bureau of Economic Research, Inc.
- Perron, Pierre & Vogelsang, Timothy J, 1992. "Nonstationarity and Level Shifts with an Application to Purchasing Power Parity," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 301-320, July.
- Vogelsang, T.I. & Perron, P., 1991. "Nonstationary and Level Shifts With An Application To Purchasing Power Parity," Papers 359, Princeton, Department of Economics - Econometric Research Program.
- Jesse Perla & Christopher Tonetti, 2014. "Equilibrium Imitation and Growth," Journal of Political Economy, University of Chicago Press, vol. 122(1), pages 52-76.
- Jesse Perla & Christopher Tonetti, 2012. "Equilibrium Imitation and Growth," Working Papers 12-03, New York University, Leonard N. Stern School of Business, Department of Economics.
- Jess Benhabib & Jesse Perla & Christopher Tonetti, 2014. "Catch-up and fall-back through innovation and imitation," Journal of Economic Growth, Springer, vol. 19(1), pages 1-35, March.
- Jess Benhabib & Jesse Perla & Christopher Tonetti, 2012. "Catch-up and Fall-back through Innovation and Imitation," NBER Working Papers 18091, National Bureau of Economic Research, Inc.
- Nancy L Stokey, 2014. "The Race Between Technology and Human Capital," 2014 Meeting Papers 1113, Society for Economic Dynamics. Full references (including those not matched with items on IDEAS)
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