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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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    Cited by:

    1. is not listed on IDEAS
    2. Jess Benhabib & 'Eric Brunet & Mildred Hager, 2020. "Innovation and imitation," Papers 2006.06315, arXiv.org, revised Aug 2020.
    3. Santiago Caicedo, 2019. "Note on Idea Diffusion Models with Cohort Structures," Economica, London School of Economics and Political Science, vol. 86(342), pages 396-408, April.
    4. 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.
    5. Thomas Sampson, 2016. "Dynamic Selection: An Idea Flows Theory of Entry, Trade, and Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(1), pages 315-380.

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