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Products, patents and productivity persistence: A DSGE model of endogenous growth

  • Tom Holden

This paper builds a dynamic stochastic general equilibrium (DSGE) model of endogenous growth that is capable of generating substantial degrees of endogenous persistence in productivity.� When products go out of patent protection, the rush of entry into their production destroys incentives for process improvements.� Consequently, old production processes are enshrined in industries producing non-protected products, resulting in aggregate productivity persistence.� Our model also generates sizeable delayed movements in productivity in response to preference shocks, providing a form of endogenous news shock.� Finally, if we calibrate our model to match a high aggregate mark-up then we can replicate the negative response of hours to a positive technology shock, even without the inclusion of any frictions.

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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 512.

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Date of creation: 01 Nov 2010
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Handle: RePEc:oxf:wpaper:512
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  1. Margarida Duarte & Diego Restuccia, 2007. "The Role of the Structural Transformation in Aggregate Productivity," Working Papers tecipa-300, University of Toronto, Department of Economics.
  2. Christopher J. Nekarda & Valerie A. Ramey, 2013. "The Cyclical Behavior of the Price-Cost Markup," NBER Working Papers 19099, National Bureau of Economic Research, Inc.
  3. Phillips, Kerk L. & Wrase, Jeff, 2006. "Is Schumpeterian `creative destruction' a plausible source of endogenous real business cycle shocks?," Journal of Economic Dynamics and Control, Elsevier, vol. 30(11), pages 1885-1913, November.
  4. Christian Groth & Karl-Josef Koch & Thomas M. Steger, 2009. "When economic growth is less than exponential," Volkswirtschaftliche Diskussionsbeiträge 129-09, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
  5. Del Negro, Marco & Schorfheide, Frank & Smets, Frank & Wouters, Raf, 2005. "On the fit and forecasting performance of New-Keynesian models," Working Paper Series 0491, European Central Bank.
  6. Peretto, Pietro F., 1999. "Cost reduction, entry, and the interdependence of market structure and economic growth," Journal of Monetary Economics, Elsevier, vol. 43(1), pages 173-195, February.
  7. Florin O. Bilbiie & Fabio Ghironi & Marc J. Melitz, 2008. "Monetary Policy and Business Cycles with Endogenous Entry and Product Variety," NBER Chapters, in: NBER Macroeconomics Annual 2007, Volume 22, pages 299-353 National Bureau of Economic Research, Inc.
  8. Diego Comin & Mark Gertler, 2003. "Medium Term Business Cycles," NBER Working Papers 10003, National Bureau of Economic Research, Inc.
  9. Gospodinov, Nikolay, 2010. "Inference in Nearly Nonstationary SVAR Models With Long-Run Identifying Restrictions," Journal of Business & Economic Statistics, American Statistical Association, vol. 28(1), pages 1-12.
  10. Christian Broda & David E. Weinstein, 2010. "Product Creation and Destruction: Evidence and Price Implications," American Economic Review, American Economic Association, vol. 100(3), pages 691-723, June.
  11. Paul Beaudry & Bernd Lucke, 2009. "Letting Different Views about Business Cycles Compete," NBER Working Papers 14950, National Bureau of Economic Research, Inc.
  12. Adjemian, Stéphane & Bastani, Houtan & Karamé, Fréderic & Juillard, Michel & Maih, Junior & Mihoubi, Ferhat & Perendia, George & Pfeifer, Johannes & Ratto, Marco & Villemot, Sébastien, 2011. "Dynare: Reference Manual Version 4," Dynare Working Papers 1, CEPREMAP, revised Jul 2014.
  13. Diego Comin, 2009. "On the integration of growth and business cycles," Empirica, Springer, vol. 36(2), pages 165-176, May.
  14. Comin, Diego & Gertler, Mark & Santacreu, Ana Maria, 2009. "Technology Innovation and Diffusion as Sources of Output and Asset Price Fluctuations," Working Papers 2014-45, Federal Reserve Bank of St. Louis.
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