IDEAS home Printed from https://ideas.repec.org/p/red/sed018/1168.html
   My bibliography  Save this paper

Bringing Data to the Model: Firm-to-Firm Learning in a Structural Model

Author

Listed:
  • Wyatt Brooks

    (University of Notre Dame)

  • Kevin Donovan

    (Yale University)

  • Terence Johnson

    (University of Notre Dame)

Abstract

We consider a general equilibrium model in which knowledge diffusion generates positive spillovers in the economy. With some probability, firms receive a random draw from the existing distribution of firm types, some portion of which is diffused to the firm's new productivity. The parameters governing the diffusion process -- the likelihood of a draw and the extent to which higher productivity is internalized -- are critical for the magnitude of these benefits. We prove that they can be identified with exogenous and random variation in the likelihood and productivity of matches. We then estimate these parameters using the results of a randomized controlled trial among Kenyan firms, in which firm owners from the left tail of the profit distribution are randomly matched one-to-one with owners from the right tail of the profit distribution. Our quantitative results imply an important role for knowledge diffusion. Removing a labor market distortion increases real income by 63 percent at our estimated parameters, compared to 36 percent in an identical model with no productivity transmission.

Suggested Citation

  • Wyatt Brooks & Kevin Donovan & Terence Johnson, 2018. "Bringing Data to the Model: Firm-to-Firm Learning in a Structural Model," 2018 Meeting Papers 1168, Society for Economic Dynamics.
  • Handle: RePEc:red:sed018:1168
    as

    Download full text from publisher

    File URL: https://economicdynamics.org/meetpapers/2018/paper_1168.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Jesse Perla & Christopher Tonetti, 2014. "Equilibrium Imitation and Growth," Journal of Political Economy, University of Chicago Press, vol. 122(1), pages 52-76.
    2. Gollin, Douglas, 2008. "Nobody's business but my own: Self-employment and small enterprise in economic development," Journal of Monetary Economics, Elsevier, vol. 55(2), pages 219-233, March.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:sed018:1168. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann). General contact details of provider: http://edirc.repec.org/data/sedddea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.