Header

UZH-Logo

Maintenance Infos

Distance to Frontier, Selection, and Economic Growth


Acemoglu, Daron; Aghion, Philippe; Zilibotti, Fabrizio (2006). Distance to Frontier, Selection, and Economic Growth. Journal of the European Economic Association, 4(1):37-74.

Abstract

We analyze an economy where firms undertake both innovation and adoption of technologies from the world technology frontier. The selection of high-skill managers and firms is more important for innovation than for adoption. As the economy approaches the frontier, selection becomes more important. Countries at early stages of development pursue an investment-based strategy, which relies on existing firms and managers to maximize investment but sacrifices selection. Closer to the world technology frontier, economies switch to an innovation-based strategy with short-term relationships, younger firms, less investment, and better selection of firms and managers. We show that relatively backward economies may switch out of the investment-based strategy too soon, so certain policies such as limits on product market competition or investment subsidies, which encourage the investment-based strategy, may be beneficial. However, these policies may have significant long-run costs because they make it more likely that a society will be trapped in the investment-based strategy and fail to converge to the world technology frontier.

Abstract

We analyze an economy where firms undertake both innovation and adoption of technologies from the world technology frontier. The selection of high-skill managers and firms is more important for innovation than for adoption. As the economy approaches the frontier, selection becomes more important. Countries at early stages of development pursue an investment-based strategy, which relies on existing firms and managers to maximize investment but sacrifices selection. Closer to the world technology frontier, economies switch to an innovation-based strategy with short-term relationships, younger firms, less investment, and better selection of firms and managers. We show that relatively backward economies may switch out of the investment-based strategy too soon, so certain policies such as limits on product market competition or investment subsidies, which encourage the investment-based strategy, may be beneficial. However, these policies may have significant long-run costs because they make it more likely that a society will be trapped in the investment-based strategy and fail to converge to the world technology frontier.

Statistics

Citations

298 citations in Web of Science®
352 citations in Scopus®
Google Scholar™

Altmetrics

Downloads

0 downloads since deposited on 28 Apr 2008
39 downloads since 12 months

Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Language:English
Date:2006
Deposited On:28 Apr 2008 11:13
Last Modified:06 Dec 2017 13:49
Publisher:MIT Press
ISSN:1542-4766
Publisher DOI:https://doi.org/10.1162/jeea.2006.4.1.37

Download

Download PDF  'Distance to Frontier, Selection, and Economic Growth'.
Preview
Content: Accepted Version
Filetype: PDF
Size: 581kB
View at publisher