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Innovation vs. imitation and the evolution of productivity distributions


König, Michael D; Lorenz, Jan; Zilibotti, Fabrizio (2012). Innovation vs. imitation and the evolution of productivity distributions. CEPR Discussion Papers 8843, Centre for Economic Policy Research.

Abstract

We develop a tractable dynamicmodel of productivity growth and technology spillovers that is consistent with the emergence of real world empirical productivity distributions. Firms can improve productivity by engaging in in-house R&D, or alternatively, by trying to imitate other firms’ technologies, subject to the limits of their absorptive capacities. The outcome of both strategies is stochastic. The choice between in-house R&Dand imitation is endogenous, and based on firms’ profit maximization motive. Firms closer to the technological frontier face fewer imitation opportunities, and choose in-house R&D, while firms farther from the frontier try to imitate more productive technologies. The equilibriumchoice leads to a balanced-growth equilibriumfeaturing persistent productivity
differences even when starting from ex-ante identical firms. The long-run productivity distribution can be described as a traveling wave with tails following a Pareto
as can be observed in the empirical data.

Abstract

We develop a tractable dynamicmodel of productivity growth and technology spillovers that is consistent with the emergence of real world empirical productivity distributions. Firms can improve productivity by engaging in in-house R&D, or alternatively, by trying to imitate other firms’ technologies, subject to the limits of their absorptive capacities. The outcome of both strategies is stochastic. The choice between in-house R&Dand imitation is endogenous, and based on firms’ profit maximization motive. Firms closer to the technological frontier face fewer imitation opportunities, and choose in-house R&D, while firms farther from the frontier try to imitate more productive technologies. The equilibriumchoice leads to a balanced-growth equilibriumfeaturing persistent productivity
differences even when starting from ex-ante identical firms. The long-run productivity distribution can be described as a traveling wave with tails following a Pareto
as can be observed in the empirical data.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Uncontrolled Keywords:Innovation, growth, quality ladder, absorptive capacity, productivity differences, spillovers
Language:English
Date:2012
Deposited On:23 Feb 2016 14:22
Last Modified:05 Apr 2016 20:07
Series Name:CEPR Discussion Papers
Number of Pages:53
ISSN:0265-8003
Official URL:http://cepr.org/active/publications/discussion_papers/dp.php?dpno=8843

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