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Eventually, Noise and Imitation Implies Balanced Growth

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  • Erzo Luttmer

    (University of Minnesota)

Abstract

This paper adds imitation by incumbent firms, and not just by new entrants, to the model of selection and growth developed in Luttmer [2007]. Noisy firm-level innovation and imitation give rise to a long-run growth rate that exceeds the average rate at which individual firms innovate. It can be shown, in simple examples, that the economy converges to a long-run balanced growth path from compactly supported initial productivity distributions. The right tail of the stationary distribution of de-trended productivity is approximately Pareto. The tail index of this distribution depends on the rate at which incumbents are able to imitate only indirectly, through general equilibrium effects of this parameter on the equilibrium growth rate.

Suggested Citation

  • Erzo Luttmer, 2013. "Eventually, Noise and Imitation Implies Balanced Growth," 2013 Meeting Papers 91, Society for Economic Dynamics.
  • Handle: RePEc:red:sed013:91
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    References listed on IDEAS

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    1. König, Michael & Lorenz, Jan & Zilibotti, Fabrizio, 2016. "Innovation vs. imitation and the evolution of productivity distributions," Theoretical Economics, Econometric Society, vol. 11(3), September.
    2. Satyajit Chatterjee & Esteban Rossi‐Hansberg, 2012. "Spinoffs And The Market For Ideas," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(1), pages 53-93, February.
    3. Robert E. Lucas Jr. & Benjamin Moll, 2014. "Knowledge Growth and the Allocation of Time," Journal of Political Economy, University of Chicago Press, vol. 122(1), pages 1-51.
    4. Fernando E. Alvarez & Francisco J. Buera & Robert E. Lucas, Jr., 2008. "Models of Idea Flows," NBER Working Papers 14135, National Bureau of Economic Research, Inc.
    5. Jesse Perla & Christopher Tonetti, 2014. "Equilibrium Imitation and Growth," Journal of Political Economy, University of Chicago Press, vol. 122(1), pages 52-76.
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    Cited by:

    1. repec:bla:econom:v:86:y:2019:i:342:p:396-408 is not listed on IDEAS
    2. Polterovich, Victor, 2017. "Теория Эндогенного Экономического Роста И Уравнения Математической Физики
      [The theory of endogenous economic growth and equations of mathematical physics]
      ," MPRA Paper 78622, University Library of Munich, Germany.
    3. Sampson, Thomas, 2016. "Dynamic selection: an idea flows theory of entry, trade and growth," LSE Research Online Documents on Economics 62623, London School of Economics and Political Science, LSE Library.

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