Technology diffusion and growth

Erzo Luttmer

Journal of Economic Theory, 2012, vol. 147, issue 2, 602-622

Abstract: Suppose firms are subject to decreasing returns and permanent idiosyncratic productivity shocks. Suppose also firms can only stay in business by continuously paying a fixed cost. New firms can enter. Firms with a history of relatively good productivity shocks tend to survive and others are forced to exit. This paper identifies assumptions about entry that guarantee a stationary firm size distribution and lead to balanced growth. The range of technology diffusion mechanisms that can be considered is greatly expanded relative to Luttmer (2007) [21]. If entrants can make only small improvements over the technologies used by the least productive incumbents, then the firm size distribution approximates Zipfʼs law and entry and exit rates are high, as in the data.

Keywords: Productivity; Imitation; Selection; Diffusion (search for similar items in EconPapers)
JEL-codes: L1 O3 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

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Working Paper: Technology diffusion and growth (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:147:y:2012:i:2:p:602-622

DOI: 10.1016/j.jet.2011.02.003

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