Technology diffusion and growth

Erzo Luttmer

No 672, Working Papers from Federal Reserve Bank of Minneapolis

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 previous work. High entry costs slow down the selection process and imply slow aggregate growth. They also push the firm size distribution in the direction of Zipf's law.

Keywords: Technology; Productivity (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-ent, nep-mic and nep-tid
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Citations: View citations in EconPapers (5)

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http://www.minneapolisfed.org/research/WP/WP672.pdf

Related works:
Journal Article: Technology diffusion and growth (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmwp:672

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