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Innovation, Reallocation, and Growth

Daron Acemoglu, Ufuk Akcigit (), Harun Alp, Nicholas Bloom () and William Kerr ()

No 12449, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We build a model of firm-level innovation, productivity growth and reallocation featuring endogenous entry and exit. A new and central economic force is the selection between high- and low-type firms, which differ in terms of their innovative capacity. We estimate the parameters of the model using US Census micro data on firm-level output, R&D and patenting. The model provides a good fit to the dynamics of firm entry and exit, output and R&D. Taxing the continued operation of incumbents can lead to sizable gains (of the order of 1.4% improvement in welfare) by encouraging exit of less productive firms and freeing up skilled labor to be used for R&D by high-type incumbents. Subsidies to the R&D of incumbents do not achieve this objective because they encourage the survival and expansion of low-type firms.

Keywords: Entry; growth; industrial policy; Innovation; R&D; reallocation; selection (search for similar items in EconPapers)
JEL-codes: E2 L1 O31 O32 O33 (search for similar items in EconPapers)
Date: 2017-11
New Economics Papers: this item is included in nep-acc, nep-eff, nep-ent, nep-gro, nep-ino, nep-mac, nep-sbm and nep-tid
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Related works:
Journal Article: Innovation, Reallocation, and Growth (2018) Downloads
Working Paper: Innovation, Reallocation and Growth (2015) Downloads
Working Paper: Innovation, reallocation and growth (2013) Downloads
Working Paper: INNOVATION, REALLOCATION AND GROWTH (2013) Downloads
Working Paper: Innovation, Reallocation and Growth (2013) Downloads
Working Paper: Innovation, reallocation and growth (2013) Downloads
Working Paper: Innovation, Reallocation and Growth (2013) Downloads
Working Paper: Innovation, Reallocation and Growth (2013) Downloads
Working Paper: Innovation, Reallocation and Growth (2012) Downloads
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