Creative Destruction, Distance to Frontier, and Economic Development

Michael Peters and Fabrizio Zilibotti

No 29333, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We construct a model of creative destruction with endogenous firm dynamics. We integrate the theory into a general equilibrium multi-country model of technological convergence where countries interact via international spillovers. We derive implications for both firm dynamics and aggregate productivity dynamics. In richer economies, firms are on average larger and the best firms grow larger over time. In poorer economies, there is little creative destruction, low selection, and firms remain small. We estimate the parameters of the model using firm-level data for India and the United States. We study the effect of counterfactual policy reforms. Industrial policy that selectively targets the more productive firms can be beneficial in poor countries while being harmful in countries close to the economic frontier. The findings echo Acemoglu et al. (2006).

JEL-codes: O12 O4 O43 (search for similar items in EconPapers)
Date: 2021-10
New Economics Papers: this item is included in nep-cwa, nep-dge, nep-gro, nep-ore and nep-tid
Note: DEV EFG
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.nber.org/papers/w29333.pdf (application/pdf)

Related works:
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:nbr:nberwo:29333

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w29333

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().