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Equilibrium Imitation and Growth

  • Jesse Perla
  • Christopher Tonetti

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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Paper provided by New York University, Leonard N. Stern School of Business, Department of Economics in its series Working Papers with number 12-03.

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Date of creation: 2012
Date of revision:
Handle: RePEc:ste:nystbu:12-03
Contact details of provider: Postal:
New York University, Leonard N. Stern School of Business, Department of Economics, 44 West 4th Street, New York, NY 10012-1126

Phone: (212) 998-0860
Fax: (212) 995-4218
Web page: http://w4.stern.nyu.edu/economics/

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  1. Michael Koenig & Jan Lorenz & Fabrizio Zilibotti, 2012. "Innovation vs. Imitation and the Evolution of Productivity Distributions," Discussion Papers 11-008, Stanford Institute for Economic Policy Research.
  2. 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.
  3. Markus Poschke, 2007. "Employment protection, firm selection, and growth," 2007 Meeting Papers 389, Society for Economic Dynamics.
  4. Xavier Gabaix, 2008. "Power Laws in Economics and Finance," NBER Working Papers 14299, National Bureau of Economic Research, Inc.
  5. 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.
  6. Jess Benhabib & Mark M. Spiegel, 2002. "Human capital and technology diffusion," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
  7. Francisco J. Buera & Ezra Oberfield, 2016. "The Global Diffusion of Ideas," NBER Working Papers 21844, National Bureau of Economic Research, Inc.
  8. Juan Carlos Cordoba & Genevieve Verdier, 2005. "Lucas vs. Lucas: On Inequality and Growth," Macroeconomics 0511021, EconWPA.
  9. David Lagakos & Benjamin Moll & Tommaso Porzio & Nancy Qian & Todd Schoellman, 2012. "Experience Matters: Human Capital and Development Accounting," NBER Working Papers 18602, National Bureau of Economic Research, Inc.
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