Endogenous Growth through Selection and Imitation

Alain Gabler () and Omar Licandro ()

No ECO2007/26, Economics Working Papers from European University Institute

Abstract: A simple dynamic general equilibrium model is set up in which firms face idiosyncratic productivity shocks. Firms whose productivity has fallen too low exit, and entrants try to imitate the best practice of existing firms, so that the expected productivity of entering firms is a function of current average productivity. Because of the resulting selection and imitation process, aggregate productivity grows endogenously. When calibrated to U.S. data, the model suggests that around one-fifth of productivity growth is due to such a selection and imitation effect.

Keywords: endogenous growth; selection; imitation; firm entry and exit (search for similar items in EconPapers)
JEL-codes: B52 O3 O41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cse and nep-dge
Date: 2007
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