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Equilibrium Imitation and Growth

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  • Jesse Perla
  • Christopher Tonetti

Abstract

The least productive agents in an economy can be vital in generating growth by spurring technology diffusion. We develop an analytically tractable model in which growth is created as a positive externality from risk taking by firms at the bottom of the productivity distribution imitating more productive firms. Heterogeneous firms choose to produce or pay a cost and search within the economy to upgrade their technology. Sustained growth comes from the feedback between the endogenously determined distribution of productivity, as evolved from past search decisions, and an optimal, forward-looking search policy. The growth rate depends on characteristics of the productivity distribution, with a thicker-tailed distribution leading to more growth.
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Suggested Citation

  • Jesse Perla & Christopher Tonetti, 2012. "Equilibrium Imitation and Growth," Working Papers 12-03, New York University, Leonard N. Stern School of Business, Department of Economics.
  • Handle: RePEc:ste:nystbu:12-03
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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. Benhabib, Jess & Spiegel, Mark M., 2005. "Human Capital and Technology Diffusion," Handbook of Economic Growth,in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 13, pages 935-966 Elsevier.
    3. Poschke, Markus, 2009. "Employment protection, firm selection, and growth," Journal of Monetary Economics, Elsevier, vol. 56(8), pages 1074-1085, November.
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    6. Aw, Bee Yan & Chen, Xiaomin & Roberts, Mark J., 2001. "Firm-level evidence on productivity differentials and turnover in Taiwanese manufacturing," Journal of Development Economics, Elsevier, vol. 66(1), pages 51-86, October.
    7. Juan Carlos Cordoba & Genevieve Verdier, 2005. "Lucas vs. Lucas: On Inequality and Growth," Macroeconomics 0511021, EconWPA.
    8. Francisco Buera, 2014. "The Global Diffusion of Ideas," 2014 Meeting Papers 1099, Society for Economic Dynamics.
    9. Buera, Francisco J. & Oberfield, Ezra, 2015. "The Global Diffusion of Ideas," Working Paper Series WP-2016-13, Federal Reserve Bank of Chicago.
    10. David Lagakos & Benjamin Moll & Tommaso Porzio & Nancy Qian, 2012. "Experience Matters: Human Capital and Development Accounting," Working Papers 2012-021, Human Capital and Economic Opportunity Working Group.
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