Endogenous Growth through Firm Entry, Exit and Imitation
A simple dynamic general equilibrium model is set up in which firms face idiosyncratic productivity shocks. Firms whose productivity has fallen too low exit, and entrants try to imitate the practice of existing firms, so that the expected productivity of entering firms is a function of current average productivity. Because of the resulting selection and imitation process, aggregate productivity in the economy grows endogenously. When calibrated to U.S. data, the model suggests that around 50 percent of productivity growth may be due to such a selection eÂ¤ect
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|Date of creation:||03 Dec 2006|
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