Eventually, noise and imitation implies balanced growth

Erzo Luttmer

No 699, Working Papers from Federal Reserve Bank of Minneapolis

Abstract: This paper adds imitation by incumbent firms, and not just by new entrants, to the model of selection and growth developed in Luttmer [2007]. Noisy firm-level innovation and imitation give rise to a long-run growth rate that exceeds the average rate at which individual firms innovate. It can be shown, in simple examples, that the economy converges to a long-run balanced growth path from compactly supported initial productivity distributions. The right tail of the stationary distribution of de-trended productivity is approximately Pareto. The tail index of this distribution depends on the rate at which incumbents are able to imitate only indirectly, through general equilibrium effects of this parameter on the equilibrium growth rate.

Date: 2012
New Economics Papers: this item is included in nep-dge, nep-fdg and nep-ino
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Citations: View citations in EconPapers (4)

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http://www.minneapolisfed.org/research/wp/wp699.pdf

Related works:
Working Paper: Eventually, Noise and Imitation Implies Balanced Growth (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmwp:699

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