EconPapers    
Economics at your fingertips  
 

Technological diversification

Miklós Koren and Silvana Tenreyro

Proceedings, 2007, issue Nov

Abstract: Economies at early stages of development are often shaken by abrupt changes in growth rates, whereas in advanced economies growth rates tend to be relatively stable. To explain this pattern, we propose a theory of technological diversification. Production makes use of different input varieties, which are subject to imperfectly correlated shocks. Technological progress takes the form of an increase in the number of varieties, raising average productivity. In addition, the expansion in the number of varieties in our model provides diversification benefits against variety-specific shocks and it can hence lower the volatility of output growth. Technological complexity evolves endogenously in response to profit incentives. The decline in volatility thus arises as a by-product of firms? incentives to increase profits and is hence a likely outcome of the development process. We quantitatively asses the predictions of the model in light of the empirical evidence and find that for reasonable parameter values, the model can generate a decline in volatility with the level of development comparable to that in the data.

Date: 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.frbsf.org/wp-content/uploads/koren.pdf Full Text (text/html)

Related works:
Journal Article: Technological Diversification (2013) Downloads
Working Paper: Technological diversification (2013) Downloads
Working Paper: Technological Diversification (2007) Downloads
Working Paper: Technological Diversification (2007) Downloads
Working Paper: Technological diversification (2007) Downloads
Working Paper: Technological diversification (2005) Downloads
Working Paper: Technological Diversification (2005) Downloads
Working Paper: Technological diversification (2004) Downloads
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:fip:fedfpr:y:2007:i:nov:x:4

Ordering information: This journal article can be ordered from

Access Statistics for this article

More articles in Proceedings from Federal Reserve Bank of San Francisco Contact information at EDIRC.
Bibliographic data for series maintained by Federal Reserve Bank of San Francisco Research Library ().

 
Page updated 2025-03-31
Handle: RePEc:fip:fedfpr:y:2007:i:nov:x:4