Dynamic selection: an idea flows theory of entry, trade and growth

Thomas Sampson

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper develops an idea flows theory of trade and growth with heterogeneous firms. Entrants learn from incumbent firms and the diffusion technology is such that learning depends not on the frontier technology, but on the entire distribution of productivity. By shifting the productivity distribution upwards, selection causes technology diffusion and in equilibrium this dynamic selection process leads to endogenous growth without scale effects. On the balanced growth path, the productivity distribution is a traveling wave with a lower bound that increases over time. The free entry condition implies trade liberalization must increase the dynamic selection rate to offset the profits from new export opportunities. Consequently, trade integration raises long-run growth. Dynamic selection is a new source of gains from trade not found when firms are homogeneous. Calibrating the model implies dynamic selection approximately triples the gains from trade compared to heterogeneous firm economies with static steady states.

JEL-codes: F12 O33 O41 (search for similar items in EconPapers)
Date: 2016-02
New Economics Papers: this item is included in nep-gro and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (87)

Published in Quarterly Journal of Economics, February, 2016, 131(1), pp. 315-380. ISSN: 0033-5533

Downloads: (external link)
http://eprints.lse.ac.uk/62623/ Open access version. (application/pdf)

Related works:
Journal Article: Dynamic Selection: An Idea Flows Theory of Entry, Trade, and Growth (2016)
Working Paper: Dynamic Selection: An Idea Flows Theory of Entry, Trade and Growth (2014)
Working Paper: Dynamic selection: an idea flows theory of entry, trade and growth (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:62623

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().