From Imitation to Innovation: Where Is all that Chinese R&D Going?

Kjetil Storesletten, Michael Koenig, Zheng Song and Fabrizio Zilibotti

No 14966, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We construct a model of firm dynamics with heterogenous productivity and distortions. The productivity distribution evolves endogenously as the result of the decisions of firms seeking to upgrade their productivity over time. Firms can adopt two strategies toward that end: imitation and innovation. The theory bears predictions about the evolution of the productivity distribution. We structurally estimate the stationary state of the dynamic model targeting moments of the empirical distribution of R&D and TFP growth in China during the period 2007-2012. The estimated model fits the Chinese data well. We compare the estimates with those obtained using data for Taiwan and find the results to be robust. We perform counterfactuals to study the effect of alternative policies. We find large effects of R&D misallocation on long-run growth.

Keywords: China; Imitation; Innovation; Misallocation; Productivity; R&d; Subsidies; Taiwan; Tfp growth; Traveling wave (search for similar items in EconPapers)
JEL-codes: O31 O33 O47 (search for similar items in EconPapers)
Date: 2020-06
New Economics Papers: this item is included in nep-bec, nep-cse and nep-sbm
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: From Imitation to Innovation: Where Is All That Chinese R&D Going? (2022)
Working Paper: From Imitation to Innovation: Where Is all that Chinese R&D Going? (2020)
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